Tax Sheltered Accounts

Creating & Managing Wealth Financial representatives specialize in tax sheltered retirement vehicles that are 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implies, contributions made on your behalf are not federally taxed, with the income tax deferred until the funds are withdrawn, typically at retirement.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 Both your contributions and the earnings are tax deferred until withdrawn, compounding the powerful tax advantage of a TSA. See our Calculator for additional information.

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.

How much may I contribute to my TSA?

When may I withdraw the money in my TSA?

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