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Tax Sheltered Annuities: An Overview

If you are in the advantaged group that constitutes educationists, academicians, churches, or certain non-profit agencies, you may have the benefit of securing a tax sheltered annuity plan. A tax-sheltered annuity (TSA) plan is a retirement savings program authorized by Section 403(b) of the Internal Revenue Code. According to this plan, if you are an eligible employee, coming under the advantage group, you can set aside a part of your income for those retirement years. What’s more! You need not pay the tax on this income before investing. That is, you can secure the total gains from the tax-deferred status that is offered by annuities. Let’s here look at an overview of the tax-sheltered annuities.

Participating in a TSA/403(b) plan may require you to forego a part of your income at regular intervals – as you have to make regular contributions. The amount will depend on a few factors such as your period of work with your present employee, the amount of your salary, and so on. There is a maximum limit beyond which you will not be required to pay, of course. This maximum limit is usually lesser than your gross income.

The TSA/403(b) is, in one way, consistent and convenient because your contributions automatically get deducted from your salary, before it is taxed. This plan also enables you to draw special tax benefits through the Internal Revenue Code Section 403(b). You effectively pay lesser tax to your federal income tax account because you make pre-tax contributions, which are also not reported as current income. Both your annuity contributions and gains from the annuity are tax-deferred till you choose to withdraw from your annuity account. Therefore, in the end, you gain with a faster growing savings in your retirement annuity account as you keep earning the interest on your accumulations, the income that you would have otherwise paid as taxes, and a higher accumulation.

While most people choose to invest in a retirement plan when they approach the retirement age, it is always better to start saving earlier. If you want to avail the benefits of a tax-sheltered annuity, you can of course start earlier. In such cases, the salary deduction does not seem to be as heavy as it becomes with matured age, when the responsibilities get diversified.

For more help on tax sheltered annuities, Click here or call toll-free at 1-800-998-4056. The annuity experts at AnnuityLibrary.com can guide you on the various aspects of tax-sheltered annuities and how you can benefit from them.

 
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