Frequently Asked Questions on TSA / 403(b)
How much can I contribute each year?
More than ever before, thanks to recent tax reforms. For tax year 2005, you can contribute 100% of your salary, up to $14,000, whichever is less. This limit will increase to $15,000 in 2006. If you're 50 or older, you can contribute an additional $4,000 "catch-up" contribution in 2005. That amount increases to $5,000 in 2006.
When can I access my money?
Once you reach age 59 1/2, you can start taking withdrawals from your 403(b) account/annuity without incurring a tax penalty. Whatever you withdraw will be taxed at your regular income-tax rate. But be careful if you retire and make withdrawals before age 59 1/2. Besides owing taxes, you'll also face an added 10% tax penalty, unless you:
- retire at or after you turn 55
- retire before age 55 and take "substantially equal periodic payments" for five years or until you reach age 59 1/2, whichever is longer
- die, or become permanently disabled
Once you turn 70 1/2, (or when you retire if later) you must begin withdrawing money from your account/annuity at least annually. Your tax advisor can explain the details.
What types of investments can I put in my TSA/403(b)?
State Farm offers annuities and mutual funds. By working with a State Farm agent, you can choose the options that may be appropriate for you.
How do I know what to invest in?
It depends on your individual situation and personality. For example, you need to consider your risk tolerance. In other words, would you be able to sleep at night knowing you could lose some or all of your savings? If the answer is no then your portfolio should consist primarily of low-risk investments.
You should also think about your time frame. Are you retiring next year or 25 years from now? Younger investors generally can afford to take on more risk -- which usually translates into owning more aggressive investments -- because they have more time to wait out declining markets.
Another important factor to consider is diversification. You've probably heard the saying, "Don't put all your eggs in one basket." With respect to investing, it means you should own different types of securities to spread your risk across a larger number of investments. Your registered State Farm agent can help you evaluate your options based on your current circumstances, your financial time frame, and your ability to tolerate fluctuations in the value of your savings and investments
What happens if I change jobs?
If you leave your current job, you can choose from several ways to continue saving for retirement. Before transferring your savings, be sure to talk to your State Farm agent and you may want to consult with a tax advisor for specific advice.
- You may be able to roll over your existing TSA/403(b) account to your new employer's 403(b). If your new employer offers a 401(k) plan instead, you may still be able to combine the accounts, thanks to recent tax-law changes.
- You can roll over your TSA/403(b) account/annuity into an individual retirement account (IRA).
- You also have the option of leaving your retirement savings in your old employer's 403(b) plan.
- You can take your 403(b) balance in cash, though your entire distribution will likely be fully taxable and may be subject to a 10% tax penalty.
Can I take out a loan against a TSA/403(b)?
No, there are currently no loan provisions in State Farm's TSA/403(b).
Can my employer contribute to the TSA/403(b)?
Yes, however only if your employer sponsors a non-ERISA TSA/403(b) plan.
Where can I find out more information on TSA/403(b) plans?
Please note: "State Farm does not endorse, either implicitly or explicitly, the content of any third party materials. State Farm has not reviewed or approved the reference materials or additional resources identified in this third party material. These materials are being provided for educational or informational purposes only and are not a solicitation to buy or sell any of the product which may be referenced. State Farm has no discretion to alter, update, or control the content of any third party materials."
Please contact your State Farm agent for additional information on TSA/403(b) plans.
State Farm does not provide tax or legal advice. You should contact your tax or legal advisor for advice regarding your situation.
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