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Tax Sheltered Annuities

If you work for an educational or cultural institution, or a nonprofit organization, you may be eligible for a tax sheltered annuity. Tax sheltered annuities are tax-advantaged retirement plans that impact your future.


  • Convenience: You can make contributions to your tax sheltered annuity via payroll deductions BEFORE your income is taxed.
  • Consistent Savings: A tax sheltered annuity makes your retirement savings grow consistently.
  • Good Tax Strategy: Your tax sheltered annuity contribution reduces your tax liability! Since you pay with pretax dollars, your contributions are not reported as current income. Therefore, you may pay less federal income tax at year-end. In fact, both your contributions AND your earnings are tax-deferred, until you withdraw them or until they are distributed to you. And since your contributions are allowed to grow and multiply TAX FREE, your tax sheltered annuity may yield a substantial amount of money when you retire!
  • Diversity: If you decide to invest in a VARIABLE tax sheltered annuity, you will be able to choose from several options by which to grow your investment. Once you select your investment options, your money will go into professionally managed investment portfolios.

The value of your tax sheltered annuity will vary over time, depending on how your investment options perform. And when you need extra income upon retirement, your tax sheltered annuity will still be able to offer you diverse options.

How Tax Sheltered Annuities are Distributed

People generally take tax sheltered annuity distributions upon retirement, if they are age 59½ or over. If you wish to take distributions before the minimum age limit and your contributions were made through payroll deductions, per IRS criteria, you have to have been separated from service due to either hardship or disability.

Even if the early withdrawal of your tax sheltered annuity may be permitted, you will still have to accept a 10% federal tax penalty on your distributions–UNLESS you were separated from service after age 55, choose substantially equal periodic payments over life expectancy, or are disabled.

In the event of your death before the minimum age limit, distributions may be made to your beneficiaries sans the 10% penalty tax. When your beneficiary is your husband or wife, your spouse may be able to roll the death benefit proceeds to an IRA or similar qualified plan, an option only available to spouses.

Loans against tax sheltered annuities are also permitted, the loan being limited to the lesser amount between $50,000 or 50% of the annuitant's vested amount.

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