403(b) Tax-Sheltered Annuity (TSA) Plan

A 403(b) TSA plan is a type of retirement savings plan available to certain employees of public schools, tax-exempt organizations, and ministers. These plans allow participants to contribute a portion of their salary to a tax-deferred retirement account, reducing their taxable income for the year. The plan is named after the relevant section of the Internal Revenue Code.

Benefits of a 403(b) TSA Plan

1. Tax-Deferred Growth: Contributions to a 403(b) TSA plan grow tax-deferred, meaning you won’t pay taxes on investment earnings until you withdraw the funds in retirement.
2. Reduced Taxable Income: Contributions to a 403(b) TSA plan are made before taxes, reducing your taxable income for the year.
3. Higher Contribution Limits: 403(b) TSA plans have higher contribution limits than traditional IRAs, allowing you to save more for retirement.
4. Portability: 403(b) TSA plans are generally portable, meaning you can take the plan with you if you change jobs or retire.
5. Loans and Withdrawals: Many 403(b) TSA plans offer loan provisions and withdrawal options, providing access to your funds in case of an emergency.

Eligibility Requirements

To be eligible for a 403(b) TSA plan, you must be an employee of:

1. Public Schools: Public schools, including state colleges and universities.
2. Tax-Exempt Organizations: 501(c)(3) organizations, such as hospitals, museums, and charities.
3. Ministers: Ministers and other clergy members.

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Investment Options

403(b) TSA plans typically offer a range of investment options, including:

1. Annuity Contracts: Fixed and variable annuity contracts offered by insurance companies.
2. Mutual Funds: A variety of mutual funds, including equity, fixed income, and balanced funds.
3. Exchange-Traded Funds (ETFs): A selection of ETFs, offering diversification and flexibility.

Contribution Limits

The contribution limits for 403(b) TSA plans are as follows:

1. 2024 Contribution Limit: $22,500 (up from $20,500 in 2023)
2. Catch-Up Contributions: An additional $7,500 for participants 50 and older (up from $6,500 in 2023)

Getting Started with a 403(b) TSA Plan

If you’re eligible for a 403(b) TSA plan, here’s how to get started:

1. Check with Your Employer: Confirm that your employer offers a 403(b) TSA plan and review the plan details.
2. Choose Your Investments: Select from the available investment options, considering your risk tolerance and retirement goals.
3. Set Up Contributions: Arrange for payroll deductions to fund your 403(b) TSA plan.

A 403(b) Tax-Sheltered Annuity plan is a powerful tool for retirement savings, offering tax-deferred growth, reduced taxable income, and higher contribution limits. By understanding the benefits, eligibility requirements, and investment options, you can unlock the full potential of these plans and secure a brighter financial future.