Tax-Sheltered Accounts
Tax-Sheltered Accounts (TSA) Offer a
Unique Way to Help Save for Retirement
What is a TSA?
Employees of educational institutions and 501(c)(3) nonprofit organizations have a unique opportunity to
regularly set aside money for their retirement in a tax-sheltered account. This long-term retirement
account, funded through payroll deduction, is called a 403(b) tax-sheltered account, or TSA.
Although it makes infinite sense to take advantage of a 403(b) TSA program, the tax rules governing these
programs are quite complicated. To help ensure that you are reaping the maximum benefits from your TSA,
you should consult with a financial professional.
Who should consider a TSA?
Anyone who is employed by an educational institution or 501(c)(3) non-profit organization who wishes to
participate in a tax-sheltered program to help save for retirement should consider a TSA.
Features and Benefits of a TSA
Key benefits of a TSA:
- Tax Deferred Earnings
You do not pay taxes on the earnings in your TSA until withdrawal.
- Reduction of Current Federal Income Tax
Because your TSA contributions are made with pre-tax dollars, they are excluded from your
current taxable income. That means you'll pay less in current federal income taxes as well as
most states' income taxes.
- Variety of Investment Options
You can invest your TSA funds in fixed and variable annuities and mutual funds.
- Low-Cost Loans
Most TSA plans allow you to borrow from the funds in your TSA at a low interest rate.
Other important features of a TSA:
- No Reduction in Other Retirement Benefits
You receive TSA benefits in addition to your pension and Social Security benefits. Social
Security credits are not affected by your TSA contribution.
- Portability
When you receive a distribution from your 403(b) program, you may elect to roll the
distribution into an IRA, another 403(b) program or the plan of a subsequent employer.
- High Annual Contribution Limits
Due to the tax advantages of a TSA, the government places a dollar cap on the total amount
participants may contribute to the plan each year.
- The maximum annual
contribution in 2009 if you are under age 50 is $16,500.
- A catch-up contribution is available if you are age 50 or older by year-end; the catch-up limit is $5,500 in 2009.
- Plan participants with 15 or more years of service with the same employer may be eligible to
contribute even more. Consult with your financial professional for details.
- Withdrawals Prior to Age 59 1/2
In general, there is a 10% penalty for withdrawals prior to age 59½. But there are
limited exceptions to this rule. Without penalty, withdrawals may be made from your TSA
prior to age 59½ due to death, disability, separation of service from your organization if you
are age 55 or older in the year of separation, certain medical expenses and expenses due to
divorce and related situations.
- Mandatory Withdrawals at Age 70 1/2
You are required to start making withdrawals from your TSA after age 70½ unless you are
still employed. Note: This has been suspended for 2009.
Setting Up a TSA
Starting your TSA program is one of the smartest moves you can make today for a financially secure
tomorrow. We can work with your employers to assist them in establishing a 403(b) plan in your workplace. We provide you access to:
- Personalized Investment Counseling Services
Your Dearborn & Creggs financial representative will review your financial situation and
objectives, make investment and contribution recommendations, calculate your maximum
allowable contribution and help you implement your TSA.
- Asset Management Programs
Diversifying* your assets among different mutual fund asset classes may help to reduce the risk of
investing. Lincoln Investment offers a variety of asset allocation and risk management
programs from leading investment asset managers.
- Broad Range of Investment Options
We make available a large
selection of mutual funds and fixed and variable annuities appropriate for a TSA.
- Consolidated Investment Platform
Lincoln Investment offers you a consolidated investment platform called Retirement SOLUTIONS. Retirement SOLUTIONS provides access to more than 1,000 mutual funds
and several asset allocation and risk management programs. Your accounts, account activity
and performance all appear on one consolidated, easy-to-understand statement for ease of
recordkeeping.
*There is no assurance that a diversified portfolio will produce better than an undiversified portfolio, nor does diversification assure against
market loss.
Dearborn & Creggs Can Help
To help build your retirement nest egg, you need to use every tool within your reach. A 403(b) TSA is an ideal
way to help build tax-advantaged retirement assets. But, like most retirement plans of this caliber, the rules
about contributions, distributions and other features of a TSA plan can be difficult to understand. That is
why it makes sense to turn to a TSA expert for help.
A Dearborn & Creggs financial representative stands ready to assist you with your TSA retirement investment
plan and to help grow your retirement assets.
RETIREMENTSOLUTIONS
