Two ways to save
You have two tax-advantaged ways to save in the Plan – Pre-tax or After-tax (Roth). Pre-tax contributions are simply contributions you make to your Plan account before taxes are deducted from your paycheck. After-tax (Roth) contributions are contributions you make to the Plan after taxes are deducted from your paycheck. You can choose to save using one contribution type or both.
Lower taxable income in the year you make the contributions.
Less impact on take-home pay because contributions are made before taxes.
Defer taxes until you separate from City service and make a withdrawal.
After-tax (Roth) Advantages
Reduce your taxable income in retirement because no taxes are due on distributions.
Diversify your tax risk if you also contribute pre-tax.
If you are a new employee and have a lengthy career ahead of you, consider starting with pre-tax contributions. Your contributions can grow tax-deferred, and your paycheck will see less of an impact. After you’ve been in the Plan for a few years, consider adding after-tax (Roth) contributions. These contributions help diversify your tax liability by giving you the choice of withdrawing from either your pre-tax savings or after-tax (Roth) savings.
Consult with your tax and legal advisors regarding your individual situation.