TSA vs. IRA: Understanding Retirement Savings Options

TSA stands for tax-sheltered annuity, a type of 403b plan, and IRA stands for individual retirement account. Both are tax-advantaged ways to say money for retirement.

Participation

You can only contribute to a TSA if you work for certain non-profit groups or educational organizations and your employer offers one. If you are under age 70-1/2, you can contribute to a traditional IRA.

Contributions

Contributions to TSAs are made through your employer with pretax dollars, meaning you do not have to report earnings on your income taxes. You make contributions to your traditional IRA, but you are allowed to take a tax deduction for your contributions.

Contribution Limits

You are generally limited to $16,500 in annual contributions ($22,000 if you are at least 50 years old) to a 403b plan. You can only contribute $5,000 to a traditional IRA per year ($6,000 if you are at least 50 years old).

Loans

You are allowed to borrow up to $50,000 or 50 percent of your TSA account, whichever is smaller. Loans are not permitted from IRAs.

Investments

With a TSA, you must invest in an annuity. With an IRA, the only things you can't invest in are on collectibles and investments that personally benefit you, such as buying stock in the business you own.