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Stanford Benefits to add Roth 403(b) to the retirement program

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Beginning January 2020, Stanford Benefits is expanding the Stanford Contributory Retirement Plan (SCRP) to include Roth 403(b), a vehicle for saving and investing with after-tax contributions.

Contributing to the Roth 403(b) will be optional, and no other plan design changes are being made at this time,  says Lori Branley, director of retirement programs.

Why Roth

The cornerstone of most workplace retirement savings plans is an option to contribute before-tax dollars and receive a company match, which Stanford provides as part of the SCRP to benefits-eligible employees after one year of service. Participants then pay taxes on the fund when they withdraw from it.

The SCRP allows for all employees to contribute before-tax dollars to a Tax-Deferred Account (TDA), starting immediately after their first paycheck. Again, participants then pay taxes on the fund when they withdraw from it.

The Roth 403(b) is a plan for after-tax contributions, which can help create tax-free income in retirement. Stanford will make it broadly available; it does not have the income restrictions you would find with a traditional Roth IRA, and like the TDA, it will be available to everyone after their first paycheck, including:

  • Benefits-eligible faculty and staff
  • Temporary and casual workers
  • Postdoctoral scholars

The value of after-tax savings

While the Roth 403(b) may not be for everyone, it is another option for those who are interested in diversifying their tax treatment, Lori says. For many investors, having a mix of pre-tax and after-tax savings is an important part of their overall plan for retirement.

Many Stanford employees already contribute after-tax dollars to the Contributory Retirement Account (CRA). So how is the Roth different? The short answer, Lori says, is that in the CRA, your after-tax contributions are not taxable at distribution, but the earnings are. With a Roth 403(b), neither the contributions nor the earnings are taxable at distribution. But there is a limit to how much you can contribute to the Roth in a given year, which is not the same for the CRA after-tax contributions.

“There are some key advantages to having both after-tax options available, so we are going to take this opportunity to provide more education about them this summer and fall,” Lori says. “We want people to know about this new option now, in anticipation of its availability in January, so they have time to learn more about how the Roth might fit into their investment strategy for 2020.” 

Learn more about after-tax plans

Take a deeper dive into the Roth 403(b) plan by reading the Frequently Asked Questions (FAQ), watching the video introduction below and watching out for workshops being offered to Stanford employees throughout 2020.

Introduction to the Roth 403(b)

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