Develop a Savings Habit
By Randy Logan, CLU, ChFC
WEA Tax Sheltered Annuity Trust
March 1998
And do it early to make it most rewarding
“Starting a tax-sheltered annuity with the WEA TSA Trust is the
best thing I ever did — I only wish I had started it even sooner.
... Get the word out to young members to get it going as soon as possible!”
We hear statements like that over and over from members who have been
investing with the WEA Tax Sheltered Annuity Trust for a long time. And,
of course, we do try to get the word out to young members, as well as
to other Wisconsin public education employees. Many people hear the message,
as our increasing enrollments can attest. But why doesn’t everyone
take advantage of this tremendous opportunity? We researched this question
and discovered some common barriers that members say prevent them from
starting a tax-sheltered annuity (TSA). Here are some of those barriers
and our responses.
Reason: Starting a TSA is too complicated.
Trust’s solution: The Trust has easy-to-use application materials
that take about five minutes to complete.
Reason: I can’t afford it. I’ve heard that TSAs require
big contributions.
Trust’s solution: The Trust plan allows you to contribute
as little as $17 a month.
Reason: I don’t know much about TSAs or investing, and I
don’t know who I can really trust.
Trust’s solution: The WEA TSA Trust was created by WEAC for
one purpose: to provide members with a TSA program that is superior to
commercial alternatives. The WEA TSA Trust has no commissioned salespeople
and no profit motive. It exists only to further the interests of our participants
— you can trust the Trust.
Reason: I need diversification and access to no-load mutual funds.
I also want a quality fixed account available when I need it.
Trust’s solution: At the Trust, you can choose from five
different no-load mutual funds, and still participate in the best fixed,
guaranteed account available. Money can be moved among the investment
options, and there are no insurance charges as there are with commercial
variable annuities.
Reason: I’ve heard that your money can be “tied up”
in a TSA, and you can be penalized if you take your money out early.
Trust’s solution: It is true that TSA money is designed to
be used in retirement, and the IRS places restrictions on when money can
be withdrawn. However, many commercial TSAs put additional fees and restrictions
on your money — the WEA TSA Trust does not. We want you to have all
the access to your money that the law allows. This means you don’t
have to be concerned about timing your withdrawals at retirement (or upon
transfer) in order to avoid fees or surrender penalties.
One of our missions at the WEA Tax Sheltered Annuity Trust is to make
it as easy as possible for you to get in the “habit of saving”
as soon as possible. By developing a savings habit early on, you create
financial opportunities such as early retirement, or the security of financial
independence for you and your family.
For more information, call the WEA TSA Trust at 1-800-279-4030.
Randy Logan is a retirement consultant at the WEA TSA Trust.
Long term disability vs. long term care
Most people know they need health insurance, but they aren’t so
sure about long term disability insurance (LTD) or about long term care
(LTC) insurance. There’s some confusion about what each type of insurance
is for. Long term disability insurance provides a source of income if
you can’t work because of a physical or mental disability. It covers
you while you are actively employed, but not after you retire. Long term
care insurance is to help pay for assistance if you are unable to do everyday
activities such as eating or using the toilet. It covers you both before
and after retirement. The adjacent chart provides a short guide on what
protection each type of insurance offers and why a person needs both.
| Long Term Disability Insurance | Long Term Care Insurance |
| What does it do? Provides replacement income if you are
unable to continue employment because of a physical or mental disability. | What does it do? Helps pay for assistance with everyday
activities such as eating or bathing either at home, at a nursing
home, or in another setting. |
| Why do you need this insurance? For most of us, our ability
to earn income and to pay our bills depends on being employed and
earning a paycheck. Most people don’t have enough money in
savings to handle a loss of income for an extended period of time.
LTD insurance provides a crucial source of income during such times.
| Why do you need this insurance? Long term care services
are expensive (they can run over $3,000 a month) and are not covered
by health or long term disability insurance. You will either have
to pay for such services out of your savings or, if you have very
little money of your own, depend on the government for help (Medicaid).
|
| What are my chances of being disabled? - If you are between the ages of 20-65, your chances of becoming
disabled for more than 90 days are greater than your chances of
dying.
- One out of every 7 Americans will be disabled for 5 years or
more before retirement age.
| What are my chances of needing long term care? - Most people (57%) needing long term care are elderly. However,
a significant number (40%) are working-age adults, and 3% are
children.
- In 7 of 10 couples turning age 65, at least one of the pair
will sooner or later require the care of a nursing home.
- Of those age 65, 77% will need long term care services and 43%
will enter a nursing home in their lifetime. Half of them will
stay an average of 2? years.
|
Posted March 6, 1998