Since September 2025, MaineSaves participants may elect to make Roth (after-tax) contributions to the MaineSaves 457(b) Plan. All MaineSaves contribution changes, including Roth elections, must be made through PRISM. Contribution limits for pre-tax and Roth contributions remain unchanged.
As a State of Maine employee, the MaineSaves 457(b) Deferred Compensation Plan gives you a valuable opportunity to save for retirement beyond your pension and/or Social Security benefits. One of the biggest questions we get from Maine state employees is if contributions should go into the Traditional 457(b), the Roth 457(b), or a combination of both. While both options can help you build retirement savings, they offer different tax advantages. Understanding how each works can help you make a more informed decision about your long-term financial future.
Understanding the Tax Difference
The biggest difference between a Traditional and Roth 457(b) comes down to when you pay taxes.Traditional 457(b)
Traditional contributions are made on a pre-tax basis. This means your contribution is deducted from your paycheck and income taxes would not be taken out. For example, if you contribute $500 per month to your Traditional 457(b), your taxable income is reduced by that amount. The advantages include:- Immediate tax savings
- Lower taxable income today
- More take-home pay than an equivalent Roth contribution
- Potential benefits for individuals who expect to be in a lower tax bracket during retirement
Roth 457(b)
Roth contributions are made with after-tax dollars. You pay taxes on the income today, but qualified withdrawals in retirement are generally tax-free. Benefits of Roth contributions include:- Tax-free qualified retirement income
- No concern about future tax increases on qualified withdrawals
- Potentially attractive for individuals with many years before retirement
- Ability to build a source of tax diversification for retirement
Why This Decision Matters for Maine State Employees
Unlike many private-sector workers, State of Maine employees may retire with multiple income sources that could include a pension, Social Security benefits, and personal retirement savings. Because retirement income may come from several sources, some retirees may find themselves in a similar tax bracket after they stop working.
The Unique Flexibility of a Governmental 457(b)
One significant advantage of a governmental 457(b) plan is the flexibility it offers to employees who retire or leave service before traditional retirement age. Unlike many other workplace retirement plans, governmental 457(b) plans generally allow participants to access their account after separating from service without the 10% early withdrawal penalty that may apply to distributions taken before age 59½ from certain other retirement accounts. While ordinary income taxes may still apply to Traditional 457(b) distributions, this feature can provide valuable flexibility for employees who are considering an earlier retirement or career transition.
When Traditional Contributions May Make Sense
A Traditional 457(b) may be attractive if:- You're in your peak earning years.
- You want to lower your current tax bill.
- You're focused on maximizing current cash flow.
- You expect to be in a lower tax bracket during retirement.
When Roth Contributions May Make Sense
A Roth 457(b) may be worth considering if:- You're early in your career.
- Your current tax rate is relatively low.
- You expect earnings to rise over time.
- You want tax-free qualified income during retirement.
- You're concerned about future tax increases.
How to Change my 457(b) Contributions to Roth
If you would like to enroll in Roth contributions, switch between pre-tax and Roth contributions, or change your current contribution election, you may do so through PRISM. Participants may switch between Traditional (pre-tax) and Roth (after-tax) contributions as their financial goals, tax situation, and retirement planning objectives change over time.
Please note that contributions can only be directed to one contribution type at a time. You may change from Traditional to Roth contributions, or from Roth to Traditional contributions, but you cannot make both types of contributions simultaneously.
For step-by-step instructions on changing your contribution type or contribution amount, visit our State of Maine Participant Resources Page. This resource includes guidance for accessing PRISM and updating your MaineSaves contribution elections.
For additional information, including frequently asked questions about Roth contributions and PRISM, please refer to the State of Maine's PRISM FAQ page.
The Bottom Line
There is no one-size-fits-all answer when deciding between a Traditional and Roth 457(b). The right choice depends on your current tax situation, expected retirement income, time horizon, and overall financial goals. For many State of Maine employees, the conversation isn't about choosing one over the other. It's about determining the right balance between current tax savings and future tax-free income.Need Help Deciding?
Choosing between Traditional and Roth contributions can have a lasting impact on your retirement strategy. With more than 35 years of combined experience, Pine Harbor Advisors has been helping Maine State employees and their families create tax-efficient retirement plans that align with their long-term financial goals.Visit our State of Maine Participant Resources page to access educational materials and retirement planning resources designed specifically for Maine state employees.