Next week is National Save for Retirement Week. What better time to review the wonderful supplementary retirement savings plan available to members of the Teachers’ Retirement System?

Retirement experts agree that the best way to ensure a financially secure retirement is either to hit the Powerball lottery jackpot or to have what is known as the three-legged stool of retirement security.

While so far, no member of our retirement system has hit the Powerball jackpot, tens of thousands have been able to retire with the support provided by the three-legged stool.

The three legs are: Social Security, a traditional pension and personal savings. All of us in the Teachers’ Retirement System are covered by Social Security and our traditional defined benefit pension plan. The third leg, personal savings, is voluntary.

Members of our retirement system have a supplementary savings plan that can be their third leg to this stool, making our retirement even more financially secure. This is the Tax-Deferred Annuity (TDA) program, which since it began in February 1970 has become one of the most valuable and popular benefits that the UFT has achieved for its members. More than 122,000 of our in-service and retired members have more than $21 billion invested in the program.

This program is a voluntary savings plan run by our retirement system. It has very low investment fees, which helps participants obtain higher earnings.

As its name implies, the Tax-Deferred Annuity program enables participants to make savings contributions on which federal income taxes are deferred. This lowers the annual income taxes paid by program participants during their working lifetimes.

New York State and New York City also defer state and city income taxes on amounts contributed to the program. Not all states make such a deferment, however. If you live outside New York, you may have to pay state income taxes, although not federal taxes, on your savings contributions.

The investment earnings generated by your contributions also have deferred taxes. But, you will pay taxes on your contributions and the investment earnings when you withdraw them.

With the TDA program, you choose where to invest the money withdrawn from your paycheck. The six investment choices available are referred to as the “passport funds” because they can be a passport to a financially secure retirement. A brief summary of each fund follows, and more detailed information is available in “Passport Funds: Fund Profiles” on www.trsnyc.org.

And here’s some key advice: Never invest in anything that you do not understand.

Fixed Return Fund: Contributions are commingled with the pension fund in a broadly diversified portfolio of assets. The rate of earnings is currently guaranteed at 7 percent, which compares very favorably with similarly guaranteed rates in investments outside of the TDA.

The other five investment funds have no guaranteed rate of return, but earn the returns of the financial instruments in which they are invested. These five funds are:

Diversified Equity Fund: This fund is invested in a broadly diversified portfolio of domestic and international stocks. The objective is to achieve a rate of return comparable to the return of the broad stock market.

Bond Fund: This fund began in January of 2012. The primary objective is to seek income from a diversified portfolio of high-quality bonds.

International Equity Fund: This fund invests primarily in the stocks of non-U.S. companies. Its contributions are commingled with the international stock investments in the diversified equity fund. The objective is to provide long-term capital growth and to achieve a rate of return equivalent to the return of the non-U.S. equity markets.

Inflation Protection Fund: This fund invests in multiple asset classes, including fixed-income securities such as Treasury Inflation Protection Securities; commodities; real estate; mortgage-related securities; stocks and others. The objective is to provide, over a full market cycle, a real rate of return in excess of inflation.

Socially Responsive Equity Fund: The objective of this fund is 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 fund invests in an actively managed portfolio of large and middle-sized U.S. and non-U.S. companies that show leadership in such areas as:

• environmental concerns
• workforce diversity
• progressive employment and workplace practices
• public health

The fund avoids investing in companies that derive substantial income from tobacco, alcohol, weapons and similar products considered detrimental to society.

All of the investment programs are carefully selected and monitored by the retirement board and its advisors and consultants. As with any market investments, there is no guarantee that any of these five funds will meet their investment objectives.

You should make your choices based on your investment philosophy and your ability to tolerate the volatility of some of the choices. More detailed information is available on the Teachers’ Retirement System website,

On the chart above are the investment results for the period ending June 30, 2013 for the five funds that don’t have a guaranteed rate of return.