Rockwell Automation provides several ways to save in the 401(k) plan. You can choose to make before-tax contributions, regular after-tax contributions or Roth after-tax contributions. All three options allow you to receive matching contributions from Rockwell Automation. The key differences are in how the contribution types are treated for tax purposes, today and at retirement.
|What Happens When You Contribute||What Happens During Your Working Years||What Happens When You Leave or Retire|
|Before-Tax Savings||Your taxable income is reduced by the amount you contribute.||Taxes are deferred on any investment earnings.||Generally, you pay taxes on your distribution (both contributions and earnings).|
|After-Tax Savings||Your taxable income is not reduced.||Taxes are deferred on any investment earnings.||Generally, you pay taxes on investment earnings only, not your contributions.|
|Roth After-Tax Savings||Your taxable income is not reduced.||Taxes are deferred on any investment earnings.||Generally, you don’t pay taxes on your distribution (including contributions and earnings).*|
* You must have first made Roth contributions under the 401(k) plan at least five years prior to the date you take a distribution and be over 59½ (or be disabled or deceased) for earnings to be distributed tax-free.
How to Choose?
To decide which contribution type is right for you, consider your current and future income tax rates. If you contribute to the 401(k) plan, you will pay taxes on the money in your account at some point. Your goal is to pay those taxes when your tax rate (i.e., tax bracket) will be lower—either now or in the future when you withdraw your money. (Important: Everyone’s situation is different, and this is not personal tax advice. For that, it’s best to talk with an attorney or tax professional to determine what’s right for you.)
You can also get help examining different savings scenarios from the professionals at Financial Engines. They offer objective, unbiased retirement help for your 401(k) plan. To get started, call Fidelity (1.877.765.4015) and ask to speak with Financial Engines, or visit www.financialengines.com/forRA/help.
Mix It Up
You don’t have to choose just one—you can split your contributions among different types. (Just be sure to contribute at least 7% of pay to receive the maximum company match!)
For more information on the contribution types, or to change your contributions, visit www.401k.com.
Important: The tax information contained herein is general in nature, is provided for informational purposes only and should not be construed as legal or tax advice. Rockwell Automation does not provide legal or tax advice and cannot guarantee that such information is accurate, complete or timely. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Rockwell Automation makes no warranties with regard to such information or results obtained by its use and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation.
Financial Engines® is a registered trademark of Financial Engines, Inc. Online Advice and Professional Management provided solely through Financial Engines Advisors L.L.C., a federally registered investment advisor and wholly owned subsidiary of Financial Engines, Inc. Financial Engines does not guarantee future results.
Published: February 2013