Roth accounts and retirement

Are you investing in after-tax Roth accounts offered by the Deferred Compensation 457(b)/401(k) Plans of the City of New York? You should know these Roth account balances are subject to Required Minimum Distributions (RMDs) beginning, if retired, by April 1 in the year following your 72nd birthday. If you are still working past age 72, you are subject to RMDs starting in the year you retire. Even though employer sponsored Roth savings plans are subject to RMDs such RMDs are tax-free.

Rather than being responsible for annual RMD calculations, I advise that these Roth account balances be rolled into your NYC Employee Roth IRA when you retire. Why? Roth IRAs are not subject to RMDs. Caution: Do not wait until retirement to establish your NYC Employee Roth IRA because you will have to wait five years before you are entitled to tax-free withdrawals of earnings. Establish your NYCE Roth IRA asap even if you plan to first fund it, upon retirement, by rolling over your Roth 457(b)/401(k) account balance(s).