Tax-Deferred Annuity
What Does Tax-Deferred Annuity Mean?
A tax-deferred annuity is a type of retirement plan available to employees of non-profit organizations, certain public education institutions, cooperative hospital service organizations, and self-employed ministers. It is referred to as “tax-deferred” because taxes are not applied until the individual begins withdrawing money from the annuity.
This type of annuity is also commonly known as a tax-sheltered annuity.
Insuranceopedia Explains Tax-Deferred Annuity
403(b) plans are an example of a tax-deferred annuity (TDA). These retirement savings plans are commonly offered to employees of government and non-profit organizations. Contributions to the account may be made by the employee, the employer, or both, depending on the plan’s structure. Employers often match employee contributions up to a specified limit. Alternatively, employees may make contributions through a salary reduction agreement.
Tax-deferred annuities are a useful way to supplement pensions and/or Social Security income during retirement.
