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Retirement Corner

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Understanding Your Savings and Taxes

The last thing you’d want to see—after working hard and saving diligently—is your money eaten up by taxes when you retire. By saving in an appropriate retirement account, whether you're years away from retiring or it's just around the corner, you may be able to reduce the potential tax impact. Here are some of the choices to consider when planning your retirement and tax situation:

  1. Delay paying taxes on savings until retirement with a tax-deferral strategy
    If you’re primarily saving for retirement via a traditional UTSaver 403(b) Tax-Sheltered Annuity (TSA) or 457(b) Deferred Compensation Plan (DCP) account you are putting off your tax liability until after you retire or begin taking withdrawals. You’re deferring taxation on your contributions and any growth on these contributions. This may make sense for those who expect their income and tax rates to be lower when they retire. This strategy also allows more of your money to stay in the tax-deferred account and the potential for it to grow over the years. Plus, lowering your current taxable income may make you eligible for other tax benefits, such as tax credits and deductions.
  2. Pay taxes now with a tax-acceleration strategy
    Contributions to a Roth UTSaver TSA are made with after-tax money—money that has already been included in your taxable income. So you’re paying taxes on your contributions when you make them—before you retire and begin taking withdrawals. In return for paying taxes up front, no federal income taxes are paid on earnings in a Roth account provided various requirements are met. This may make sense for those who expect their income and tax rate to be higher when they retire. 
  3. Pay some taxes now and some later with a tax-diversification strategy
    Saving in a combination of a traditional UTSaver TSA or DCP and the Roth UTSaver TSA allows you to pay some taxes up front and some after you retire or begin taking distributions. This tax-diversification strategy also provides flexibility when you're retired. You may be able to choose which accounts to take distributions from to help reduce taxes. For example, if tax rates or your taxable income are high one year, you may choose to take a tax-free withdrawal from a Roth account. Conversely, if tax rates are low, you may opt to take a withdrawal from a traditional UTSaver TSA or DCP. Note that minimum required distributions (MRDs) are generally required to be taken each year from tax-advantaged retirement savings accounts, beginning at age 70½.

Courtesy of Fidelity Investments at

DWS Scudder Distribution Fund Checks

In the summer of 2009, the Deutsche Fair Fund Settlement Management company submitted checks resulting from a lawsuit brought about by the New York Attorney General against DWS/Scudder.  The checks were made out to the UT Institution, Scudder, and finally the participant’s name. 

If you are a current employee and were contributing to DWS/Scudder anytime between January 1, 1998, and September 30, 2003, and have received one of these checks, please contact the University of Texas System immediately at 512-499-4616.  The checks are going to be reissued directly to all affected participants.  Active employees should not cash or deposit their checks in a personal account since they may face tax consequences by not submitting the checks directly to their current TSA or ORP plan provider.

This information is intended for general informational purposes only. You should not consider it tax, legal or investment advice.  In the event that anything in this newsletter conflicts with the UT System Retirement Program plan documents, UT System policies, or state or federal law, the UT System Retirement Program plan documents, UT System policies, or state or federal law will govern.  Please consult your tax, legal or investment advisor for assistance with your personal situation.

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