The Benefits of Investing in a §403(b)

§403(b)s are tax-advantaged retirement programs for employees of hospitals, educational institutions, and certain other not-for-profit organizations. §403(b) plans provide an outstanding means to maximize retirement savings. With the traditional §403(b), investors may fund their accounts with pre-tax payroll deductions and both contributions and earnings are treated as tax-deferred until withdrawal. Roth §403(b) accounts are funded with after-tax dollars. These accounts may grow tax-free, and all qualified distributions are tax-free.*

Employees may defer to both a traditional §403(b) and a Roth §403(b) account, and annual elective deferrals may be divided between the two accounts in any manner the employee chooses. However, once Salary Reduction Agreements are in place and contributions have been deposited, monies may not be transferred between the accounts.

§403(b) Accountholders Enjoy These Benefits...

Pre-tax Savings — Participants who defer compensation into a §403(b) account realize immediate tax savings on their contributions. Before any taxes are taken out, your paycheck is reduced by the amount you decide to invest. Therefore your total taxable income is less.

Tax-deferred Growth Potential — Taxes on your investment earnings are also deferred. You needn't pay taxes on anything that your deferred compensation earns until you retire. For many people, that time is years away, allowing for long-term investment growth. Withdrawals are taxed as ordinary income, but many retirees find themselves in a lower tax bracket than when they were working. (A 10% penalty may apply for early withdrawal from a §403(b) account—i.e., before age 59½ unless taking advantage of a §72(t) distribution. See your Legend Advisor for details.)

Convenient Payroll Deduction with Built-in Dollar Cost Averaging — Investing in a §403(b) plan couldn't be simpler. You may decide to defer a certain percentage of your compensation each pay period to be invested in your §403(b) account. As this amount is automatically deducted from your paycheck at regular intervals, dollar cost averaging is built in to your investment plan. With dollar cost averaging, you buy more shares when prices are low and fewer when prices are high. Over time, the average amount paid (average cost) for each share may be less than the average price per share. This strategy also eliminates the need to attempt to decide when is the best time to buy. (Dollar cost averaging does not assure a profit and does not protect against a loss in declining markets. Investors should consider their ability to purchase shares continuously during periods of falling share prices.)

Optional Employer Contributions — Your employer may elect to match a certain percentage of your §403(b) plan contributions. This participation incentive is money you receive above and beyond your regular salary.

Choice and Portability — Many investment options are available for §403(b) plans, including fixed annuities, variable annuities and mutual funds. This variety enables you to design a customized plan that suits your time horizon, risk tolerance and investment objectives. Also, your §403(b) account is portable. If you should leave your job, your account can be transferred to another employer's §403(b) program or rolled to an IRA.

Dynamic Asset Management — Most §403(b) plan participants have access to professionally managed investment portfolios, with either insurance or mutual fund companies. In addition, Legend Advisory Corporation offers diversified2 asset allocation portfolios through the Strategic Asset Management^® (SAM^®) and SAM^® Select Portfolios and the Freemark Managed Portfolios. The portfolios are managed by a team of investment professionals who monitor world markets in an effort to maximize returns and reduce risk.

Loan provision —Loans are available from most §403(b) plans. Under Legend's loan program, both principal and interest are paid back to your account via automatic payroll deduction. This means if you meet your payment schedule on time, there is no charge for the loan.³

Distributions —§403(b) account assets can be withdrawn without penalty after age 59½, even if you are still employed. Upon withdrawal, ordinary income taxes will apply. Distributions must begin no later than April 1 of the calendar year following the calendar year in which you attain age 70½, unless you are still working. §403(b) plan participants who have terminated employment under the age of 55 may begin distributions through an IRS provision known as a §72(t) distribution. See your Legend Advisor for details.

While Roth §403(b) Accountholders Enjoy These Benefits...

Tax-free Growth Potential — Assets in Roth §403(b) accounts may grow tax-free.

Tax-free Retirement Income — Roth §403(b) accounts can provide tax-free income during your retirement years since all qualified distributions for a Roth §403(b) account are tax-free.*

Convenient Payroll Deduction with Built-in Dollar Cost Averaging —As with regular §403(b) accounts, employees may fund their Roth §403(b)s through payroll deduction. Since this amount is automatically deducted from your paycheck at regular intervals, dollar cost averaging is built in to your investment plan. With dollar cost averaging, you buy more shares when prices are low and fewer when prices are high. Over time, the average amount paid (average cost) for each share may be less than the average price per share. This strategy also eliminates the need to attempt to decide when is the best time to buy. (Dollar cost averaging does not assure a profit and does not protect against a loss in declining markets. Investors should consider their ability to purchase shares continuously during periods of falling share prices.)

Choice and Portability — The investment options that are available for Roth §403(b) plans are fixed annuities, variable annuities and mutual funds. This variety enables you to design a customized investment strategy that suits your time horizon, risk tolerance and investment objectives. Also, your Roth §403(b) account is portable. If you should leave your job, your account can be transferred to another employer's Roth §403(b) program or rolled to a Roth IRA.

Dynamic Asset Management —Most Roth §403(b) plan participants have access to professionally managed investment portfolios, with either insurance or mutual fund companies. In addition, Legend Advisory Corporation offers diversified2 asset allocation portfolios through the Strategic Asset Management^® (SAM^®) and SAM^® Select Portfolios and the Freemark Managed Portfolios. The portfolios are managed by a team of investment professionals who monitor world markets in an effort to maximize returns and reduce risk.

Loan provision —Loans are available from most Roth §403(b) plans.Under Legend's loan program, both principal and interest are paid back to your account via automatic payroll deduction. This means if you meet your payment schedule on time, there is no charge for the loan.³

Distributions — Roth §403(b) distributions may begin at age 59½ (provided the account has been funded for at least 5 years).¹ And, while regular §403(b) account distributions are mandatory at age 70½, Roth §403(b) distributions are not mandatory until death if the account is rolled over to a Roth IRA.

¹In order for the Roth §403(b) account to be distributed tax-free, it must be funded for a minimum of five years and distributions cannot be taken before the accountholder attains age 59½. A participant would also qualify for tax-free distributions if the account was held for five years and the account owner became disabled (under the strict definition of disability of §72(p) of the IRS code). Furthermore, in the event of the accountholder's death, beneficiaries would receive tax-free distributions if the account was held for at least five years. Otherwise, the distribution would be treated as part return of principal and part taxable earnings. A 10% premature withdrawal penalty may apply to the earnings.

²Diversification does not assure against market loss.

³Defaulting on a loan from a retirement plan constitutes a distribution from that plan. Distributions from a retirement plan are subject to federal income tax and may incur an additional 10% penalty if the participant is under the age 59½.