The Advantages of Supplemental Retirement Savings Accounts

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1 The Advantages of Supplemental Retirement Savings Accounts

2 A Tax-Sheltered Account, or TSA, enables you to reduce federal income taxes while supplementing your retirement savings.

3 The Program Your Supplemental Retirement Program 403(b), 403(b)(7), Roth 403(b)(7) and 457(b) A 403(b) also called a TSA is an employer-sponsored supplemental retirement savings program for employees of public educational and non-profit organizations. The 403(b)(7) section of the federal tax code is designated for investing in tax-sheltered custodial mutual funds. A Roth 403(b)(7) is an employer-sponsored supplemental retirement savings program which allows for after-tax contributions and tax-free growth of contributions and earnings. Contributions to the Roth 403(b)(7) or 403(b)(7) are aggregated and cannot exceed the annual 403(b) contribution limit. A 457(b) is an employer-sponsored deferred compensation plan that allows you to contribute pre-tax money directly from your paycheck. The 457(b) reduces current federal taxes and grows tax-deferred similar to the 403(b). Your 457(b) contributions can be made in addition to the 403(b) contribution limits thereby enabling you to have twice the current federal tax savings.

4 The Program The Advantages With a Tax-Sheltered Account (403(b)/403(b)(7)/457(b)), you contribute before-tax dollars, thereby lowering your taxable income and deferring federal income taxes until money is withdrawn - usually at retirement. The tax savings are in addition to your growing retirement nestegg. When you enroll in a supplemental retirement program such as a 403(b)/403(b)(7), Roth 403(b)(7) or 457(b), you may start, stop, increase or decrease your contributions at any time during the year (subject to your employer s 403(b) or 457(b) plan document). You may contribute as little as $50 per pay. The maximum annual contribution limits are as follows: Account Type Basic Contribution Limit Age 50 or Older Catch Up Total Annual Contribution Limit 403(b)(7) or Roth 403(b)(7) Tax-Sheltered Program $16,500 $5,500 $22, (b) Program $16,500 $5,500 $22,000 Combined 403(b)(7), Roth 403(b)(7) & 457(b) Total $33,000 $11,000 $44,000 Contribution limits are subject to change and may be adjusted annually.

5 Accumulating Your Nestegg The Time Is Now! The Cost of Waiting to Make Contributions. Annual Savings Age Started Saving # Of Yrs. Contributed Amount Contributed Accumulation at Age 62 Ed $2, $64,800 $225,446 Joy $2, $24,000 $298,786 This chart assumes a fixed annual rate of return of 8% with earnings reinvested. This hypothetical example is not intended to show the performance of any particular fund for any period of time, fluctuation of principle value or investment return. The regular investment of money does not ensure a profit or protect against losses.

6 Q & A What investment vehicles may fund a TSA Program? Mutual Funds, Fixed Annuities and Variable Annuities or any combination of these investment vehicles. How does a TSA contribution reduce my taxable income? Your 403(b)/403(b)(7) contribution is excluded from your gross income. You will reduce your federal income taxes by approximately $280 for every $1,000 you contribute to the Program (assuming 28% effective tax rate). Your account will grow tax-deferred until withdrawn. Roth 403(b)(7) contributions are made with after-tax money and do not reduce your current federal income taxes; however the account grows tax-free (subject to the Roth 403(b)(7) rules). The Roth account must be held for the greater of 5 years or through age 59 1/2, death or disability. May I exchange or transfer assets from one TSA to another? You may, subject to your employer s 403(b) plan document allowing for exchanges and/or transfers. When can I take money out of my TSA? Subject to plan approval, you may withdraw contributions or earnings when you reach age 59 1/2, become disabled, or reach age 55 and separated from service. Otherwise, there is a 10% federal penalty for early withdrawal. Regardless of age, you may withdraw funds from a 457(b) Program without a 10% federal penalty upon separation from service. May I borrow against my TSA? TSA Programs may offer a loan provision. Loan availability is subject to your employer s 403(b) plan document. A 457(b) Program does not offer a loan provision.

7 What do the recent 403(b) Regulations mean? Section 403(b) plans (or tax-sheltered accounts) are contribution plans for employees of educational and non-profit organizations under IRC 501(c)(3). On July 26, 2007, new 403(b) regulations were published amending the original 403(b) rules dating back to Name The recent 403(b) regulations established a new set of rules to lessen the differences between 403(b) plans and other tax-favored employer-based retirement plans like 401(k) plans and 457(b) plans, although key differences remain. Your employer must have a written plan for their 403(b) Program. The new rules allow, with employer plan approval, exchanges and/or transfers to employer approved 403(b) product vendors. Participants can no longer self-certify that they are eligible to take withdrawals, loans or distributions from their 403(b) plan. Only the plan sponsor may make this certification. Plan administration is the responsibility of the plan sponsor, your employer. The sponsor can delegate this responsibility to an individual or organization. Many employers use a TPA (Third Party Administrator) service to ensure 403(b) compliance with the employer s 403(b) plan document. Address I am interested in a free-no obligation consultation with a Kades-Margolis Financial Advisor. Please Print Clearly. City State Zip Employer Home Phone ( ) Work Phone ( ) Address By giving my phone number I understand that I am giving permission for Kades-Margolis to contact me. TSAADV10

8 Call or Visit Us Online Today! , ext Old Eagle School Road, Suite 1220 Wayne, PA *Securities and Registered Investment Advisory Services offered through GWN Securities Inc., N. Jog Road, Palm Beach Gardens, FL 33418, Member FINRA, SIPC Kades-Margolis Corporation and GWN Securities Inc., are non-affiliated companies. NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES BUSINESS REPLY MAIL FIRST-CLASS MAIL PERMIT NO. 49 POSTAGE WILL BE PAID BY ADDRESSEE WAYNE PA KADES-MARGOLIS CORPORATION 998 OLD EAGLE SCHOOL RD STE 1220 WAYNE PA