Annuities

Creating & Managing Wealth Financial representatives specialize in the various annuities available to educators. These special plans can offer different benefits compared to other retirement and saving options.

What is a Tax -Sheltered Annuity?

A Tax-Sheltered Annuity (TSA), or 403(b) plan, is an employer sponsored retirement savings program. Participation is limited by law to employees of public educational organizations and certain nonprofit organizations. The vast majority of participants are employees in public schools, colleges, and universities.

Contributions to a TSA are made for the participating employees by his or her employer. The money that is contributed to the TSA comes either from employer contributions-which are called non-elective deferrals, or from employee contributions, called elective deferrals. Elective deferrals are deducted from the participant's paycheck and forwarded to the insurance company or mutual fund custodian selected by the participant. The participant signs a salary reduction agreement, giving the employer the authority to make the paycheck deduction and remit it to the company chosen. Most TSA contributions are elective deferrals.

What are the advantages of participating in a TSA?

As the name Tax-Sheltered Annuity implies, contributions made on your behalf are not federally taxed, with the income tax deferred until the funds are withdrawn, typically at retirement. To illustrate the tax advantage of a 403(b) plan, suppose you are a teacher earning $35,000 this year. If you elect to put $5,000 in a TSA through a salary reduction agreement, you will pay current federal income tax on only $30,000, with the tax on the $5,000 contribution deferred until you withdraw the money. Both your contributions and the earnings are tax deferred until withdrawn; compounding the powerful tax advantage of a TSA.

Why should I participate in a TSA?

While most state teacher retirement plans provide retirement benefits, chances are your teacher retirement plan or other employer sponsored retirement program will not provide enough income after retirement to enable you to maintain your standard of living. A TSA permits you to supplement teacher retirement plans or another retirement plan.

Can I put my money in an annuity if I am not an educator?

Yes. An annuity is an investment vehicle which accepts all types of money. A Non-Qualified annuity is comprised of after tax money. When you start taking distributions from the annuity, you will only be taxed on the earnings. Like a TSA, you can deposit money into your annuity on a monthly basis by doing automatic drafts from your bank account. If you have an old 401k or 403(b), you can roll that money into an IRA Annuity.

To learn more about the different annuity options that are available for you, please call a Creating & Managing Wealth Representative today.

Withdrawals are taxed as ordinary income in the year received. Tax penalties and penalties for early withdrawal may apply if funds are withdrawn prior to age 59-1/2. The above example is for illustrative purposes only and does not attempt to predict actual results of any particular investment.

* Creating and Managing Wealth is an agency member of the National Tax Sheltered Accounts Association.

 

Annuities

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This site has been prepared solely for information purposes and is not intended to be a solicitation, offer or sale of securities products or investment advisory services to anyone who resides outside the United States. Lincoln Investment and Capital Analysts are registered as investment advisors with the U.S. Securities and Exchange Commission and Lincoln Investment is registered as a broker/dealer in all 50 states. Lincoln Investment and Capital Analysts and its Financial Representatives may only transact business in a particular state if first registered and only after complying with registration requirements.

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