Pre-tax versus Roth Deferrals

Employee Benefits, Financial Services

What is the difference between pre-tax and Roth retirement plan contributions?

Whether your organization offers a 401(k), 403(b) or 457(b) group retirement plan benefit, this is very likely one of the the most common question asked by your employees. So what is the right answer? Which source makes better financial sense for retirement saving contributions – pre-tax or Roth?

While the exact answer would require a crystal ball – to see all future tax rates, investment returns and changing personal life situations – there are some pretty straight forward guidelines to determining which option is better for any given individual. For example, younger investors, currently in lower tax brackets and with significant investment time horizons, would favor the Roth option. Meanwhile investors with a shorter timeline to retirement, or that might expect to be in a lower tax bracket in retirement, would favor pre-tax contributions.

M3 Financial has created an informational video which walks through the differences between the two options. It hits on guidelines for determining which avenue is appropriate for each individual’s unique situation, and it helps dispel myths regarding income limits for Roth contributions. For instance, while it’s true that a household filing jointly with income exceeding $199,000 cannot contribute to a Roth IRA, there are no such income limits when contributing to a Roth under a group 401(k), 403(b) or 457(b) retirement plan.

Whether you’re an employer looking for ways to become more educated and guide employees in their decisions or an individual who would like to know more about options without committing to formal time with a financial planner, contact M3 Financial to learn more. Request a link to the Pre-tax vs. Roth educational video today.


Investment advisory services offered through M3 Financial, a registered investment advisor and separate entity from M3 Insurance.

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