What is a 403b or a Tax Sheltered Annuity?
A 403b, also known as a Tax-Sheltered Annuity (TSA) is a tax advantaged retirement savings plan sponsored by an employer. 403b plans are specifically designed for employees of hospitals, museums, educational institutions and certain other non-profit organizations to help them save for their retirement. The majority of participants in a 403b plan are teachers in public schools, colleges or universities. Employees make contributions into a 403b plan by making pre-tax payroll deductions. Depending on your 403b plan, you authorize pre-tax payroll deductions to be invested in a tax-sheltered annuity (TSA) contract or in a custodial account made up of mutual funds offered by your employer. Dividends and investment earnings grow tax deferred until they are withdrawn after age 59 1/2 at which time the withdrawals will be taxed as income. Withdrawals prior to age 59 1/2 usually incur an additional 10% penalty. However, most 403b plans allow investors to take out a loan. Basically, the 403b plan
