Roth TSA Option Now Available

February 2006

Tax-sheltered annuity (TSA) plans can now offer an after-tax, or Roth, option for savings. This means that public school employees may be able to designate part or all of their TSA contributions to Roth savings.

What's the difference?

Tax-free growth makes the Roth TSA an attractive option for some who are saving for retirement. Roth contributions are taxed now, but qualified withdrawals, including earnings, are tax-free. When you retire, you will owe nothing on years of compounded earnings, which may be a significant amount.

Conversely, when you make your TSA contributions on a before-tax basis, it reduces your taxable income now and defers payment of taxes until the time you withdraw the money. Roth offers tax relief in retirement One of the greatest benefits of Roth savings is it gives you the ability to reduce your tax liability in retirement.

For decades, the assumption has been that most, if not all, people would be in a lower tax bracket in retirement - and thus would benefit from before-tax savings. However, changes in tax policy, including lower tax rates, the taxation of Social Security, and other deductions made available under the tax code, increase the chances that you will be in the same or higher tax bracket when you retire.

The Trust offers Roth TSA

The WEA Trust offers the Roth feature to TSA plan sponsors (districts). However, school districts are not required to offer the Roth to their employees. Check with your employer for availability.

You can find more information about the Roth TSA at weatrust.com in the News section.

Posted March 8, 2006