A flexible, after-tax savings program specifically designed for persons in education and research has been introduced by Teachers Insurance and Annuity Association (TIAA).
Called Teachers Personal Annuity, it features a highly competitive interest rate, very low administrative costs, and no commissions, sales or surrender charges. The investors principal is guaranteed by TIAA, and the savings compound on a tax-deferred basis, even after age 70 1/2 (the time when IRAs and similar pension savings must be withdrawn).
Teachers Personal Annuity is designed for investors who already are contributing the IRS maximum to their before-tax 403(b) retirement plans, or who have long-term savings in CD, money market funds or similar taxable accounts.
To qualify, investors must be employed at a not-for-profit education or research institutions, such as a public or private school, college or university, teaching hospital or museum. Spouses also are eligible.
The annuity currently offers a 6 percent annual interest ratehigher than todays rates for CDs and money market funds. The rate at the time of purchase is guaranteed until the following March 1, when the TIAA Board of Trustees sets the rate for the following 12 months.
The minimum required investment is $2,000; up to $300,000 may be contributed in a given year. As in other tax-deferred investments, withdrawals before age 59 1/2 may be subject to the IRSs 10 percent penalty on earnings. Upon retirement, investors may choose to take cash withdrawals, or payments for a fixed period, or guaranteed life income. At the time, the investors pay the appropriate tax for their income level.
Educators may call TIAA for assistance in retirement investment planning and receive a free, personalized investment illustration. Educators also may inquire about the before-tax pension savings programs that have comprised the core portfolio of TIAA since 1918. They include retirement annuities and supplemental retirement annuities. Call 1-800-223-1200, 9 a.m.6 p.m.