TAX-SHELTERED ANNUITY GUIDE

The tax-sheltered annuity, a smart retirement strategy

A tax-sheltered annuity helps individuals build wealth with tax-deferred growth. It is designed for those in nonprofit organizations, public schools, and certain government positions who want to grow savings without being taxed until retirement.

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01 · WHAT IT IS

What is a tax-sheltered annuity

A tax-sheltered annuity, or TSA, is a type of retirement account that allows for tax-deferred growth. The contributions you make to the account grow without being taxed until you begin to withdraw them, typically in retirement.

The main advantage of a TSA is that it reduces your taxable income for the year in which you contribute, allowing you to save more for the future while enjoying immediate tax relief. Tax-sheltered annuities are often offered to employees of nonprofit organizations, public schools, and some government employees. They are similar to other tax-deferred retirement accounts like 401(k)s and IRAs, but they are specifically tailored for those working in eligible sectors.

Tax-deferred growth Lower taxable income today Built for eligible sectors

02 · HOW IT WORKS

How a tax-sheltered annuity works

A TSA works by allowing you to make contributions to an annuity account. The key features fall into three parts.

TD Tax-deferred growth

You do not pay taxes on the contributions or the earnings in the TSA until you withdraw funds, typically in retirement. This allows your investment to grow without the drag of annual taxes.

TC Tax-deductible contributions

Contributions to a TSA are generally tax-deductible, which reduces your taxable income for the year. That means less paid in taxes in the short term, which can be particularly advantageous in a higher tax bracket.

GI Guaranteed income

Once you reach retirement age, you can use the funds to provide a steady income stream. This is the ultimate goal of the annuity, to provide financial stability in retirement.

03 · WHO BENEFITS

Who can benefit from a TSA

Tax-sheltered annuities were initially designed for employees of nonprofit organizations, public schools, and certain government employees. They are also available to others who meet specific eligibility requirements.

NP Nonprofit employees

Those who work for a qualifying nonprofit organization may be eligible for a TSA, allowing them to save for retirement with tax advantages.

PS Public school staff

Teachers and other public school employees are among the core groups these annuities were built to serve.

GV Government employees

Certain government positions qualify as well, extending the same tax-deferred savings path to eligible public workers.

04 · THE STRATEGY

Why it can be the right fit

For the right client, a tax-sheltered annuity pairs immediate tax relief with a foundation for guaranteed retirement income. It is a straightforward way to build savings now and turn that balance into a dependable stream later.

By David Racich, Owner and CEO of Brokers Alliance Updated July 2025 Independently owned since 1982

Ready to position tax-sheltered annuities with your clients?

Brokers Alliance has been independently owned since 1982, based in Fountain Hills, Arizona, and works with agents, agencies, IMOs, FMOs, and BGAs. Talk with our team about building this strategy into your practice.

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