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Q&A: Additional retirement contributions

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Laura KampsWhat do I need to consider if I want to put additional money toward my retirement above my 6.6% contribution to WRS? Should I put it in WRS or another retirement product such as a 403(b) or IRA?

In many cases, a 403(b) or IRA may be a better place to put additional contributions because of the tax advantages they offer.

With a pretax 403(b) or IRA, you are able to reduce your income now and defer taxes until you withdraw in retirement. With a Roth 403(b) or IRA, you pay the tax now on contributions but benefit from tax-free growth when you withdraw.

In contrast, excess WRS contributions do not offer either of these tax advantages because the Internal Revenue Service does not allow you to deduct your contributions nor does it allow the benefit of tax-free growth.

If you’ve already made the maximum allowable contributions in every tax-advantaged plan available, then you may want to consider making after-tax additional contributions to WRS. Just keep these points in mind:

  • The growth on additional contributions you make will be taxed when you withdraw.
  • Additional contributions do not buy you more years of service (a commonly held misconception).
  • You are not required to annuitize additional contributions like you are for the main pension.
  • The additional contribution portion of your WRS account does not need to be taken in any form when you retire. You may defer distributions until age 70½.

If you have questions about this or other retirement topics, give us a call at 1-800-279-4030.

Laura Kamps, RIS Specialist