TaxSheltered Annuity Plans Also known as 403b Plans

Tax-Sheltered Annuity Plans Also known as 403(b) Plans

What is a 403(b) TSA plan? ü TSA = Tax Sheltered Annuity ü Long-term retirement savings plan ü Available to employees of certain educational and non-profit organizations ü Money put into annuity contract that becomes future income ü Traditional 403(b) contributions and any earnings accumulate tax deferred until distributions are received

403(b) Eligibility Employees of qualified organizations offering a 403(b) TSA retirement program, including: ü Public school system: university, elementary or high school ü Other tax-exempt organizations under section 501(c)(3): hospitals, zoos, private schools, arts organizations, religious organizations, charitable foundations and more

How a TSA Works ü Contributions made via payroll deduction ü Any growth is tax deferred ü At retirement, the Account Value can be withdrawn to help supplement your clients retirement income

Making Contributions Clients choose the amount and can change it to fit ever-changing needs… ü Annuity enrollment application ü Salary Reduction Agreement (SRA) with employer

403(b) TSA Contribution Limits For 2019: ü Up to 100% of salary to a max of $19, 000/year ü Those aged 50+ can contribute an additional $6, 000 ü 15 years of service with the qualified organization may be able to contribute an additional $3, 000 ü Annual limits are indexed to increase for inflation

Stopping Contributions ü Subject to employers rules, client can stop and restart contributions as needed without opening a new contract ü No penalty to start/stop contributions ü All funds in the contract continue to grow tax deferred

When to Contribute Sooner = Better ü With the power of compounding in an annuity, when your client starts saving can be more important than how much your client saves Karen starts saving at 25 and saves until 35 Bill starts saving at 35 and saves until 65 Pat starts saving at 25 and saves until 65

Benefits of a TSA ü Tax advantages – reduces current income taxes because contributions come out of salary before taxes ü Tax deferral – contributions and any earnings compound over the years tax deferred ü Disciplined savings – contributing through payroll deduction makes it simple to contribute regularly and save for retirement

Tax Deferral ü For Traditional 403(b)s, payment of taxes is postponed on both contributions and any earnings until money is withdrawn (usually after retirement) ü Reduces current income taxes while accumulating money for retirement

Taxes on Distributions ü Traditional 403(b) & Governmental 457(b): full amount of payout is generally included in taxable income for federal tax purposes ü Roth 403(b): contributions made with after-tax dollars; distributions are tax-free; earnings are tax-free if distributed after age 59½, due to death or disability and if made at least 5 years after contributions started ü If prior to 59½, a 10% federal penalty tax may apply to taxable portion of distribution from 403(b) TSA, but not from Governmental 457(b) ü State and local taxes may apply

Power of Tax Deferral This graph assumes a $100, 000 qualified investment, accumulated for 35 years, with a 5% annual growth rate. Lower capital gains and dividend tax rates would make the taxable investment more favorable than the rate illustrated and reduce the difference in performance between these accounts. Consider the current and anticipated tax brackets in making a decision, as they may also impact comparison results. The amount of the tax-deferred accumulation would be reduced if early withdrawal charges were reflected. This is a hypothetical scenario for illustration purposes only.

Additional Benefits of Using an Annuity ü Flexible payout options ü Guaranteed Death Benefit ü Loans available

Payout Options An annuity can give your client guaranteed income for life! These payout options may be available when taking distributions: ü Income for a Fixed Period ü Life Annuity with Payments for at Least a Fixed Period ü Joint and One-Half Survivor ü Income for a Fixed Period, Not to Exceed Life Expectancy

Guaranteed Death Benefit ü Effective estate planning tool ü Remaining values go directly to beneficiaries without going through probate All guarantees are based on the claims-paying ability of the issuing company

Loans and Withdrawals 403(b) TSA and Governmental 457(b) funds are meant for retirement, but clients can access money if needed ü Low-interest loans may be available – subject to repayment ü Withdrawals may have early withdrawal charges (may be referred to as Surrender Charges in the contract) and are subject to withdrawal restrictions

Taking Distributions not required at age 59½ There is an annual required minimum distribution (RMD) that must be taken starting by the later of: ü April 1 following the year reaching 70½ ü April 1 following the year your client severs employment with the qualified employer

403(b) Withdrawal Restrictions ü Until age 59½, tax law prohibits withdrawals unless they are made after severance from employment with the employer, disability, death, on account of financial hardship (as defined by the IRS) or to a reservist called to active duty ü No tax law restrictions on withdrawals after age 59½ except with respect to any employer contributions ü In some cases, employer may impose additional restrictions

Service Credit Purchases ü Funds can be used to buy permissive service credits or buy back forfeited credits under the state retirement system ü Tax law withdrawal restrictions do not apply ü No taxes or penalties ü Note that early withdrawal charges may apply

Tax-Sheltered Annuity Plans 403(b) Plans ® Annuities are offered through the subsidiaries of Great American Financial Resources , ® ® Annuity Investors Life Insurance Company and Great American Life Insurance Company. Principal Underwriter/Distributor: Great American Advisors®, Inc. , Member FINRA and a subsidiary of Great American Financial Resources, 301 E. Fourth Street, Cincinnati OH 45202 You should consider the contract’s underlying portfolios’ investment objectives, risks, charges and expenses carefully before investing. Call (800) 789. 6771 or visit www. GAIG. com to obtain a free prospectus containing this and other information to read carefully before investing. Variable annuities are long-term investment vehicles. Investments in variable portfolios are subject to market risks, so upon withdrawal, they may be worth more or less than their original cost.