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.

Pre-tax Advantages

  • 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 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 savings.

Consult with your tax and legal advisors regarding your individual situation.