We’ve said it before and we’re saying it again, the two most important aspects of investing for retirement are time and compounding.
The longer your money is working for you, the greater the potential for compounding your assets. That’s good for you and good for your retirement. A 403(b) retirement program lets you take advantage of both and since your investment grows tax deferred, over time, this tax advantage may be significant. And when you pay taxes on the money at the time it’s withdrawn, you may be taxed at a lower rate, making it go even further for you.
As an educational employee in Michigan you should consider a supplement to your state pension plan. As an educational employee you are eligible for an employee benefit program through your employer called a 403(b), TDA (Tax-Deferred Annuity) or may also be referred to as a TSA (Tax-Sheltered Annuity).
You can benefit in that you are part of a select group that can take advantage of this excellent investment tool that offers you an opportunity to invest money for your retirement on a tax-deferred basis. It is similar in some ways to an individual retirement account (IRA), however, usually will offer a substantially greater tax savings potential.
A 403(b) is also flexible. You can invest in an array of options for growth, fixed stability, or a combination of fixed and variable investments to focus on your goals. A 403(b) program can travel with you if you change jobs, or if you remain with your original employer, you can access it without penalty as early as age 59 ½ or earlier in certain cases. Except for certain exceptions such as hardship, disability, and death, withdrawals before age 59 ½ may be subject to a 10% federal income tax penalty, and applicable taxes.
The IRS recently finalized the first new regulations for 403(b) plans in 40 years. With the changes, 403(b)s now function more like 401(k) plans to ensure better accountability for the operation of 403(b) plans.
New portability rules effective September 25, 2007
Up until September 24th, 2007 investors could shift their assets to and from virtually any 403(b) investment of their choice. Beginning September 25th, 2007 plans do not have to allow such transfers. Transfers from one custodial account or contract to another among the vendors in a 403(b) now must be explicitly permitted under the plan.
Learn: the Key Benefits of the MEA-endorsed Tax-Deferred Annuity Program
There are risks associated with investing in mutual funds and variable annuities, including potential loss of principal value.
Variable annuities are subject to market risk which may cause value to fluctuate including loss of principal for variable accounts.
For more complete information about funds including a fund's objectives and risks, and its charges and expenses, please call 1-800-292-1950 for a product prospectus. Please read the prospectus and carefully consider the investment objectives, risks and charges and expenses and other information before investing because these factors will directly affect future returns.
Guarantees and/or payments are based on the claims-paying ability of Issuer and not on the value of the securities within the account.
MEA Financial Services/Paradigm Equities, Inc. does not give tax or legal advice. The comments regarding the law and tax treatment simply reflect our understanding of current interpretations of such laws. Since laws are always subject to interpretation and possible changes, we recommend that you seek the counsel of an attorney, accountant or other qualified tax advisor regarding these matters as it applies to your particular situation.