A 403(b) plan, also known as a tax-sheltered annuity, is a retirement plan available to employees of public educational systems and certain tax-exempt organisations. It enables employees to contribute a portion of their pre-tax salary, which can accumulate tax-free until retirement. Employers may also make contributions to this plan.
A tax-sheltered annuity, also known as a 403(b) plan, is a retirement plan available to employees of public educational systems and certain tax-exempt organisations. This plan allows employees to make contributions to their retirement account before taxes, thereby lowering their taxable income. Employers may also contribute to the plan. The funds in the account grow tax-free until they are withdrawn at retirement. For instance, a teacher employed by a public school may have a tax-sheltered annuity as part of their employee benefits. They have the option to allocate a portion of their salary to the plan, resulting in a reduction of their taxable income. The funds in the account will accumulate tax-free until they reach retirement age and begin withdrawing the money.
A tax-sheltered annuity is a retirement savings plan that allows employees of certain organisations, such as non-profit organisations, to contribute pre-tax dollars to an annuity account.
Employees of certain organisations, such as non-profit organisations, are typically eligible to contribute to a TSA.
The maximum contribution limit for a TSA is determined by the IRS and may change from year to year. For 2021, the maximum contribution limit is $19,500.
There are no age restrictions for contributing to a TSA, as long as you are an eligible employee of a qualifying organisation.
Yes, there are penalties for withdrawing money from a TSA before age 59 ½. The penalty is typically 10% of the amount withdrawn, in addition to any applicable taxes.
Yes, you may be able to roll over funds from another retirement account, such as a 401(k) or IRA, into a TSA.
The investment options available within a TSA may vary depending on the plan provider. Typically, options include mutual funds, annuities, and other investment vehicles.
Some TSA plans may allow for loans, but this will depend on the specific plan. It is important to check with your plan provider to determine if loans are allowed and what the terms and conditions are.
If you leave your job, you may be able to leave your TSA account with the plan provider or roll it over into another retirement account.
You must start taking distributions from your TSA by April 1st of the year following the year in which you turn 72 (or 70 ½ if you turned 70 ½ before January 1, 2020). These distributions are known as required minimum distributions (RMDs).
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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