A New Contribution Option: Roth 401(k)

Freedom to Choose

Beginning January 1, 2010, you will have a new contribution option under the Northrop Grumman Savings Plan: Roth 401(k) contributions. Roth 401(k) contributions are made after taxes are deducted, and earnings on those contributions can be withdrawn tax free when you retire.

The Roth 401(k) Contribution Advantage: Tax-Free Earnings

Roth 401(k) contributions work the same way your tax-deferred, and regular after-tax contributions do:

You may contribute and grow your savings through convenient payroll deduction.
You choose how much of your eligible compensation you want to contribute.
You may elect to invest your contributions in the plan’s wide range of investment options.
Your annual contributions are subject to the IRS limits.
Earnings on your investments grow tax-free while they remain in the plan.
Early withdrawals (all or a portion) may be subject to federal income tax and may be subject to penalty taxes on the earnings.

The big difference between tax-deferred, after-tax and Roth 401(k) contributions is how taxes are applied to contributions and distributions.

Traditional tax-deferred contributions are made before taxes are withheld, which means you save on taxes today. However, your contributions and earnings are subject to taxes when they are withdrawn.
Traditional after-tax contributions are made after taxes are paid, and earnings are taxable on distribution. However, access to your account while you are an active employee is more flexible than is the case with tax-deferred and Roth 401(k) contributions.
Roth 401(k) contributions are made after taxes are paid, but your earnings are tax-free on distribution if:

The distribution occurs at least five consecutive calendar years after your first Roth 401(k) contribution and you are at least age 59½, or
The distribution is made as a result of your death or disability

This Investment Center includes links to tools and information provided by organizations that are not associated or affiliated with Northrop Grumman. The tools and information provided by these organizations are not the property of Northrop Grumman, and Northrop Grumman is not responsible for their accuracy, completeness, or continued availability. You are solely responsible for the investment and asset allocation decisions you make pertaining to your personal savings and investments, including investments in the Northrop Grumman Savings Plan, Financial Security and Savings Program, and any other savings plans sponsored by Northrop Grumman.