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INSTITUTIONS
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RETIREMENT PLAN INVESTOR
Use your plan ID (available on your account statement) to determine which employer-sponsored retirement plan website to use:
IF YOUR PLAN ID BEGINS WITH IRK, BRK, 754, 1 OR 2
Visit americanfunds.com/retire
IF YOUR PLAN ID BEGINS WITH 34 OR 135
Use this side-by-side comparison of the important features of traditional and Roth accounts to understand your options.
Both traditional and Roth 401(k) and 403(b)s offer tax advantages. Use this table to help determine which one better suits your needs.
|
Traditional 401(k)/403(b) |
Roth 401(k)/403(b) |
---|---|---|
Federal income tax treatment |
Contributions and earnings are taxable when withdrawn. |
Qualified distributions are tax- and penalty-free. (See Distributions below for more details.) |
Contribution limits |
The maximum contribution is $23,000 or $30,500 for participants 50 and older, in 2024. However, plans may set lower limits. The limits apply to all contributions combined, whether traditional, Roth or both. |
Same as traditional. |
Employer matching contributions |
Employer matching contributions are allowed if offered by the plan. Matching contributions are not included in income when made to the plan and are taxable when withdrawn. |
Same as traditional. |
Distributions (withdrawals) |
Distributions are taxable as ordinary income. |
Qualified distributions are tax- and penalty-free if the first Roth contribution was made at least 5 years before and the participant:
For nonqualified distributions, earnings are taxable and may be subject to a 10% early withdrawal penalty. |
Required minimum distributions (RMD) |
Generally, you must take required minimum distributions beginning at age 72 or at retirement, whichever is later. Once withdrawals begin, RMDs must be taken each year. |
Same as traditional. |
Loans and hardship withdrawals |
Plans may allow loans and hardship withdrawals. |
Same as traditional. |
Effects on taxable income |
Taxable income is used in determining your tax bracket and eligibility for certain benefits, such as tax credits and financial aid. |
Roth contributions do not reduce your taxable income at the time of investment. However, qualified Roth distributions are not taxable. |
Options when employment ends |
When leaving your employer, your account balance can be:
|
When leaving your employer, your account balance can be:
|
Employers with 401(k) or 403(b) plans aren’t required to offer Roth accounts, so check with your benefits department to find out if the Roth option is offered by your plan. For details specific to your plan, such as contribution limits and employer matches, read your employer’s summary plan description. You should consult a financial professional or tax advisor to find out more about your options.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Use of this website is intended for U.S. residents only.
American Funds Distributors, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.