Starting June 2, 2025, employees of Berkshire Health Systems who are eligible to contribute to the company’s 403(b) retirement plan will have access to a Roth 403(b) option, alongside the traditional pre-tax 403(b). This new option gives you more flexibility in how you save for retirement, but it also raises a big question: Should you make the switch?

First, What’s a Roth 403(b)?

A Roth 403(b) is funded with after-tax dollars—you pay taxes on your contributions now, but qualified withdrawals in retirement (generally after age 59½) are tax-free.

In contrast, the traditional 403(b) allows you to contribute pre-tax dollars, reducing your taxable income now, but you’ll pay income tax on withdrawals in retirement.

Important: The IRS annual contribution limits apply to both accounts combined—you’re not getting extra room to contribute, just a choice in how your contributions are taxed.

Why Choose the Roth 403(b)?

Roth 403(b) Pros:

• Tax-free income in retirement. Withdrawals from a Roth account are tax-free, which can be a huge advantage if you expect to be in a higher tax bracket down the road. If you’re just starting your career, this is likely to be the case for you.
• More room to Roth. Your other option for tax-free retirement income, Roth IRAs, are capped at $7,000 in 2025 (up to $8,000 if you’re over 50). You can stash up to $23,500 split between your Roth and traditional 403(b) in 2025 – and even more if you’re over 50.  Note: Roth IRA contributions are subject to income limitations starting at $150,000 a year.
• No required minimum distributions (RMDs). This can be huge! Roth 403(b)s are no longer subject to RMDs, unlike traditional 403(b)s. This means that, once you reach your 70s, you won’t be required to make withdrawals if you don’t want to.

Roth 403(b) Cons:

• You’ll pay more in taxes now. Unlike the money you place in your 403(b), contributions to a Roth 403(b) are included in your taxable income for the year.
• May reduce certain tax credits or deductions. If you’re on the edge of a tax bracket or income limit, contributing after-tax could impact eligibility for other benefits by increasing your taxable income for the year.

So… What Should You Do?

Take the tax deduction when your income is the highest.

If you’re early in your career, working part-time in retirement, or have already amassed substantial retirement account balances, paying taxes now to avoid taxes later often makes sense. In other words, a Roth 403(b) may be the better option. On the other hand, if you’re in your peak earnings years, reducing your taxable income now (by contributing to the traditional 403(b) option) is likely your best bet.

If you’re unsure which option aligns best with your long-term goals, please reach out to your advisor! This is exactly the kind of decision your financial plan is meant to help with, and now may be a good time to make an update.

In the meantime, know this: Just because the Roth option is available doesn’t mean you need to change anything. It’s one more tool in your toolkit—one that’s best used with a solid plan in hand.

Are you looking for help making the most of your Berkshire Health Systems retirement benefits?

The team at Berkshire Money Management is here to help! We work with many of the dedicated nurses, doctors, and other professionals in the Berkshire Health Systems family.

Schedule a free 15-minute chat today to find out how we can help you make the most of your employee benefits today!

BMM is not affiliated with or endorsed by Berkshire Health Systems (BHS) or any of its affiliates. Benefits are subject to change as determined by BHS. Adviser assumes no obligation to update any informational materials.