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24 05 2007

What is Tax-Sheltered Annuity?

Posted by: Eric Hundin in , Estates, Wills, Trusts, Career Information, Blog Carnival

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The Tax-Sheltered Annuity Program or TSA, is program that permits an employee to set aside a section of their salary “tax free” by buying an annuity or a mutual fund, from an authorized institution. The money set aside to purchase this annuity is not taxed and continually grows until the end date or time of distribution. This normally takes place after retirement, depending on the age you set. To withdraw the money early, you have to pay fees or an early withdrawal penalty. You cannot exceed your income amount for obvious reasons, besides, the program isnt set up that way. You might also want to know that only paydays for each calendar year that fall between January 1st and December 31 are counted.

You have a few options when it comes to your decision of when you want to enroll, change the amount of money or even cancel your TSA, as long as it is before the tenth of the month and prior to date that you want the change to take place.

There are other contribution limits involved, you cannot contribute more than $15,500 in one year unless you are over the age of 50 and then you are allowed an additional $5,000. You can also increase the amount if you have 15 or more years with the TSA and then you are allowed an additional $3,000 more. The current cap is $44,500 for all.

If you are interested in enrolling in the Tax-Sheltered Annuity, you must first choose the Investment Company you wish to use. You will find them in an approved list. You need to then make contact with the company of your choosing. They will, in turn, send you an application for a TSA Account.

Once you receive the form, you need to select one or more investment products offered by the company. The application has a limit on how long before it has to be returned so be sure to get it back on time. You should look into more than one company at a time, this way you can compare their track rates and history of the companies. You will also notice a difference of terms from one company to another and might find one better for you. You also have to file a Tax-Sheltered Annuity Purchase/ Change Agreement, and a UT System Disclaimer.

Remember it is your money and your responsibility to complete any and all forms involved and to notify your employer of you decisions. Many employers will even have information that you can use to finding the right company.

If you decide to cancel or change the amount deducted, there are forms you have to fill out. One form is the Tax-Sheltered Annuity Purchase/ change form. You will put your new monthly amount in the box provided and then turn it over to your payroll department or supervisor. You do not have to contact the Investment Company when deciding to change the amount of money going into it. You might, however, wish to contact them on your own to be sure the changes you requested are in place at there ending as well.

Since you have considered getting a Tax-Sheltered Annuity, then you might want to consider looking into a Living Will and Trust to make sure that money goes where you want it to in the event of your passing on, or are no longer able to take care of yourself.

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At least redirecting mail in advance would be one thing off your mind.

This entry was posted on Thursday, May 24th, 2007 at 9:29 am and is filed under , Estates, Wills, Trusts, Career Information, Blog Carnival. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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