Tax-Sheltered Accounts

Employees of educational institutions and 501(c)(3) nonprofit organizations have a unique opportunity to regularly set aside money for their retirement in a tax-sheltered account. This long-term retirement account, funded through payroll deduction, is called a 403(b) tax-sheltered account, or TSA.

Although it makes infinite sense to take advantage of a 403(b) TSA program, the tax rules governing these programs are quite complicated. To help ensure that you are reaping the maximum benefits from your TSA, you should consult with a financial professional.

Anyone who is employed by an educational institution or 501(c)(3) non-profit organization who wishes to participate in a tax-sheltered program to help save for retirement should consider a TSA.

Key benefits of a TSA:

• Tax Deferred Earnings
  You do not pay taxes on the earnings in your TSA until withdrawal.
• Reduction of Current Federal Income Tax
  Because your TSA contributions are made with pre-tax dollars, they are excluded from your current taxable income. That means you'll pay less in current federal income taxes as well as most states' income taxes.
• Variety of Investment Options
  You can invest your TSA funds in fixed and variable annuities and mutual funds.
• Low-Cost Loans
  Most TSA plans allow you to borrow from the funds in your TSA at a low interest rate.

Other important features of a TSA:

• No Reduction in Other Retirement Benefits
  You receive TSA benefits in addition to your pension and Social Security benefits. Social Security credits are not affected by your TSA contribution.
• Portability
  When you receive a distribution from your 403(b) program, you may elect to roll the distribution into an IRA, another 403(b) program or the plan of a subsequent employer.
• High Annual Contribution Limits
  Due to the tax advantages of a TSA, the government places a dollar cap on the total amount participants may contribute to the plan each year.
  • The maximum annual contribution in 2007 if you are under age 50 is $15,500 .
  • A catch-up contribution is available if you are age 50 or older by year-end; the catch-up limit is $5,000 in 2007 .
  • Plan participants with 15 or more years of service with the same employer may be eligible to contribute even more. Consult with your financial professional for details.
• Withdrawals Prior to Age 59 1/2
  In general, there is a 10 percent penalty for withdrawals prior to age 59 1/2. But there are limited exceptions to this rule. Without penalty, withdrawals may be made from your TSA prior to age 59 1/2 due to death, disability, separation of service from your organization if you are age 55 or older in the year of separation, certain medical expenses and expenses due to divorce and related situations.
• Mandatory Withdrawals at Age 70 1/2
  You are required to start making withdrawals from your TSA after age 70 1/2 unless you are still employed.

• Personalized Investment Counseling Services
  Your Lincoln Investment financial representative will review your financial situation and objectives, make investment and contribution recommendations, calculate your maximum allowable contribution and help you implement your TSA.
• Asset Management Programs
  Diversifying* your assets among different mutual fund asset classes may help to reduce the risk of investing. Lincoln Investment offers a variety of asset allocation and risk management programs from leading investment asset managers.
• Broad Range of Investment Options
  As an independent full-service broker/dealer, Lincoln Investment makes available a large selection of mutual funds and fixed and variable annuities appropriate for a TSA.
• Consolidated Investment Platform
  Lincoln Investment offers you a consolidated investment platform called Retirement SOLUTIONS. Retirement SOLUTIONS provides access to more than 1,000 mutual funds and several asset allocation and risk management programs. Your accounts, account activity and performance all appear on one consolidated, easy-to-understand statement for ease of recordkeeping.

*There is no assurance that a diversified portfolio will produce better than an undiversified portfolio, nor does diversification assure against market loss.

Lincoln Investment Planning, Inc. Can Help

To help build your retirement nest egg, you need to use every tool within your reach. A 403(b) TSA is an ideal way to help build tax-advantaged retirement assets. But, like most retirement plans of this caliber, the rules about contributions, distributions and other features of a TSA plan can be difficult to understand. That is why it makes sense to turn to a TSA expert for help.

Lincoln Investment Planning, Inc. is an independent full-service broker/dealer that has pioneered in serving the retirement investment needs of educators and employees of non-profit organizations since 1968. A Lincoln Investment financial representative stands ready to assist you with your TSA retirement investment plan and to help grow your retirement assets.