If you’re a member of the Teachers’ Retirement System or the Board of Education Retirement System, you also have a voluntary, supplemental savings plan with low fees to help you build your personal savings. Started in 1970, the Tax-Deferred Annuity is among the most popular benefits TRS offers members, with more than 75 percent of our in-service and retired members participating.
You can defer paying federal income taxes on your TDA, which lowers your income taxes during your working lifetime. The Internal Revenue Service allows annual contributions of up to $18,500 for members under age 50 and up to $24,500 for members 50 or older.
New York State and New York City also defer state and city income taxes on TDA contributions. (Members who live in other states should consult their tax experts.) Taxes are also deferred on the investment earnings generated by your contributions. You pay taxes on your contributions and earnings only when you withdraw them.
The TDA is an excellent program, but it is intended for retirement and therefore has strict rules and possible tax penalties on withdrawals before retirement. It is not intended for use in an emergency, so we advise that you have other savings for that purpose.
The Passport Funds
With the TDA, money is withdrawn from your paycheck, and you can invest in six investment choices that can be a “passport” to financial security. A brief summary of each fund follows. More detailed information can be found on the TRS website.
The Fixed Return Fund offers a guaranteed rate of return set by the New York State Legislature. The current annual rate is 7 percent for UFT members. (The other five investment funds do not have a guaranteed rate of return.)
The Diversified Equity Fund invests in the stocks of U.S. companies and non-U.S. companies and other investments. The objective is to achieve a rate of return comparable to the return of the broad equity market.
The Balanced Fund is a moderately conservative investment option. The objective is to seek current income and some capital appreciation. The Balanced Fund began on Jan. 1, 2018, and was preceded by the Bond Fund from 2012 to 2017 and the Stable-Value Fund before 2012.
The Inflation Protection Fund seeks exposure to multiple asset classes and markets, which may include the following: floating debt rate, commodities, inflation-protected debt (including U.S. Treasury Inflation-Protected Securities) and real estate debt and equity securities. The objective is to provide, over a full market cycle, a rate of return that exceeds inflation.
The International Equity Fund invests primarily in non-U.S. companies in developed markets, as well as emerging markets, traded on a variety of stock exchanges around the world. The objectives are to provide long-term capital growth and to achieve a rate of return comparable to the return of the non-U.S. equity markets over a full market cycle.
The Socially Responsive Equity Fund invests in stocks of large and mid-cap U.S. and non-U.S. companies that meet certain financial and social criteria. It seeks companies that show leadership in areas such as environmental concerns, diversity in the workforce and progressive employment. The fund avoids companies that derive substantial revenue from alcohol, tobacco, nuclear power or weapons. The objectives are to achieve positive long-term growth and to earn a rate of return comparable to the return of the broader equity market while reflecting social priorities.
The retirement board and its advisers and consultants carefully select and monitor the investment funds. As with any market investment, there is no guarantee that any of these funds will meet its investment objectives.
Please note: BERS members have two investment choices — the Fixed Return Fund and the Diversified Equity Fund.