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 And when you pay taxes on the money at the time it’s withdrawn, you may be taxed at a lower rate, making it go even further for you.
*An example will emphasize our point. Let’s assume at age 40 you began a 403(b) program. The investment you chose pays a 9% annual return and you started investing $150 a month. You also reinvested your earnings. At age 65, your investment would have grown to over $168,000, whereas a similar investment strategy using only after-tax dollars would be worth a little over $81,000.
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.
The Key Benefits of the MEA-endorsed Tax-Deferred Annuity Program:
·Choice of funding options from two of the largest insurance companies in America:
· The Prudential Insurance Company
· Metropolitan Life Insurance Company
| PRUDENTIAL ACCOUNT ACCESS |
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| Need to access your Prudential account? If you have not already set this up, first call the Client Service toll free number: 1-800-458-6333 & request your PIN number, which for security purposes will be mailed to you. | Once you have your number you may access your account information at: Prudential Account Access . |
· Current Taxable Income can be Reduced. You can reduce your current income taxes by having contributions deducted before taxes from your salary. This reduces taxable income and allows you to invest more for retirement.
· Growth is Tax-Deferred. Tax-deferred growth provides a higher return than similar investments on an after-tax basis. The result is that the money that you would normally pay in taxes remains working for you, not for the government. The interest or earnings on the contribution also grows tax-deferred.
· Diversification. An array of products provide a wide variety of funding options to provide investment opportunities from the domestic bond market to international stocks.
· Systematic Salary Reductions. Make investing easier with systematic salary reductions. A dollar cost averaging plan does not assure a profit and does not protect against loss in declining markets.
· Risk. Remember, variable annuities are subject to market risk which causes their value to fluctuate.
· Comprehensive Statements. Statements detailing all your quarterly account activity and your balance by funding option.
· Loans. With a loan provision you may have access to your money for emergencies, or to fund special purchases, for instance a new home, or to pay college tuition.
· Flexibility. With IRS contribution limits, a person may change the amount as conditions warrant. You may:
· change your investment allocation of future contributions
at any time
· increase or decrease your contribution rate
NOTE: Some restrictions may apply.
· Distribution Alternatives.* You may receive:
· a lump-sum payment,
· elect periodic payments,
· elect an annuity,
· elect systematic disbursements,
· roll over your funds to another TDA plan or an IRA.
* Be aware that the taxable portion of any distribution not rolled over is subject to federal income tax at the investor's personal federal income tax rate. State and local income taxes may also be due on funds you receive. If funds are withdrawn prior to age 59 1/2, a 10% Federal tax penalty may apply.
· Ease of Beneficiary Transfer.
· Death Benefit. In the case of death, your MEA-endorsed TDA program provides a death benefit. See the prospectus for details.
· Registered Representatives throughout Michigan to answer your questions and help you with your personal retirement planning. Click here to locate the Representative in your area.
· Convenient Service. One toll free number available anywhere in the U.S. to call for information about your account and your funding choices.
Disclosures:
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.
*The hypothetical example is not intended to be indicative of any specific investment.
Hypothetical results are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment
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.
Many tax provisions are scheduled to expire in 2006 through 2010 unless extended or made permanent by Congress.
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