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LibraryLady

Guaranteed Interest account AXA

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As I have mentioned, we successfully added Aspire to our 403b choices, which I am very happy about. However, I was going over some figures, and it seems my guaranteed interest account does actually pay 3%. This is a shock to me. On the AXA statements, there is a column Net Investment Portfolio results. When I add these up for the year it does amount to 3%. I thought fees were deducted from this as well. Can anyone confirm this? This would become the bond portion of my account at Aspire, so I'm wondering if I should just leave this part at AXA and transfer the rest. I really don't want to, but I don't want to cut off my nose to spite my face, as they say. 

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What is the name of your AXA 403b plan? The 403bcompare tool has a AXA Equi-vest 201 that has a "Guaranteed Investment Option". It has a “minimum rate of return” of 1.00% and the interest rate as of Jan 1, 2016 is 1.50%. It doesn't state the 2017 rate.? These options, often called Fixed accounts, or Stable Value funds incorporate the annual (expense ratio) fee into the rate of return. Your AXA plan must tell you what the minimum and the current rate of return is. The current rate is reset each year. 

I would rather keep the fixed income part of my portfolio in a diversified index bond fund. Others (Steve, ScottyD) prefer a fixed account as long as it has a rate of return of around 3%. Maybe for only part of their fixed income?

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I don't know anything about your particular stable value fund, but this might be relevant: While krow36 is correct that the fund expense ratio of the stable value fund is incorporated into the rate of return, it is entirely possible that your 403b provider subtracts an account maintenance fee on all assets in the plan, including the stable value fund.  For example, I have a Calstrs Pension2 account, which is held at Voya.  The stable value fund is currently paying 3%.  But Pension2 charges an annual .25% on everything in the plan, so my effective interest rate is 2.75%.

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Thanks for all your replies. My contract goes back to 2004, and the minimum guaranteed interest rate for this contract is 3.%.  It's a series 200, if that means anything. The newer teachers have 1%, but things were different back in 2004. It's not a stable value, it's guaranteed interest rate. My contract shows 3% up through 2027 when it goes to 3.05%. As everyone knows, the language in these contracts is as muddy as they can make it. I thought they took the 1.34% in fees off the total account value, but I don't think they do. Believe me, I do not want to keep a cent at AXA, but I don't want to be stupid either. I will keep looking to see if I can make sense of this in the contract, but I was hoping someone else had posed that question to AXA before....

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I collected a year's worth of statements and was able to confirm I am earning 3% in the guaranteed interest account. I also just looked at another post here from poster grw in the thread called "Our Recent Experience with AXA"  and a supervisor at AXA confirmed the guaranteed interest account has no fees. Finally, I did find a part in the contract that said-"The fixed maturity options and the guaranteed interest option are not covered by the fee table and examples. However, the annual administrative charge, the withdrawal charge, the third-party transfer or exchange charge, and the charge if you elect the Variable Immediate Annuity payout option do apply to the fixed maturity options and the guaranteed interest option. A market value adjustment (up or down) will apply as a result of a withdrawal, transfer or surrender of amounts from a fixed maturity option."

This actually depresses me. I want to be done with AXA, and feel they have taken advantage of all of us for many years. On the other hand, emotion aside, my best option may be to leave that portion of my account there, and roll over the rest. Any thoughts? I may post this on bogleheads as well to get a broader response. Who would think the ability to earn 3% would leave me feeling bad???

 

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Sounds to me like you need to get clear on the annual administrative charge (is it a flat fee or a percentage of assets?) and the "withdrawal charge" (how much is it and under what circumstances is it imposed)?  Only then can you make an informed decision about whether it is worth staying with this fund.  Guaranteed 3% sounds good, if those charges aren't poisoning the deal.

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The administrative charge is the lessor of $30 or 2% of the account. The withdrawal charge is who the heck knows. I would not keep it at AXA and start withdrawing funds at some point. I would roll it over to my IRA at Vanguard when I retire in probably 4 years. There is no charge to transfer the funds to another 403b. 

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In their podcast #48, Scott and Dan discuss moving some of Dan’s fixed income from Vanguard to  a TIAA Traditional annuity. http://directory.libsyn.com/shows/view/id/teachandretirerich    It’s at about 12:16 to 14:40. Maybe Scott and/or Dan will join in and offer their thoughts on using a fixed account giving out 3% with the despised AXA? Relying on AXA to be solvent and pay out your money in a big downturn would make me nervous. 

I had a large part of my 403b with VALIC for way too many years (10?), considering it a part of my fixed income. I suspect I would have been better off in a low-cost bond index fund. Yes there would have been ups and downs with a bond fund, but over the long term, I think it would have worked out just fine. VALIC was bought by AIG which had to be bailed out by the government in 2008 recession. 

I see you've posted that you would pull it out when you retire in about 4 yrs. Maybe staying short-term makes sense, I don't know. But it's AXA!!?? Would you move money from a Vanguard TBM fund to the AXA guaranteed 3% annuity?

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24 minutes ago, LibraryLady said:

The administrative charge is the lessor of $30 or 2% of the account. The withdrawal charge is who the heck knows. I would not keep it at AXA and start withdrawing funds at some point. I would roll it over to my IRA at Vanguard when I retire in probably 4 years. There is no charge to transfer the funds to another 403b. 

It's probably a good deal if you have enough in there to make the $30 charge negligible, and if it's true there's no cost to rolling the money out.  I don't know about AXA's stability, but this sort of account has a very good track record of holding value: I don't recall hearing of anyone losing money in any of them, even during that 2008 period. 

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I know what you mean. I'm having a hard time with this decision. I'm so disgusted with how these companies conduct business with teachers, I don't want to leave a cent there. Even if it's poor decision, and it probably would be, I may roll the whole thing over. I won't be touching it for at least another 10 years when I will take my RMD. 

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17 minutes ago, krow36 said:

In their podcast #48, Scott and Dan discuss moving some of Dan’s fixed income from Vanguard to  a TIAA Traditional annuity. http://directory.libsyn.com/shows/view/id/teachandretirerich    It’s at about 12:16 to 14:40. Maybe Scott and/or Dan will join in and offer their thoughts on using a fixed account giving out 3% with the despised AXA? Relying on AXA to be solvent and pay out your money in a big downturn would make me nervous. 

I had a large part of my 403b with VALIC for way too many years (10?), considering it a part of my fixed income. I suspect I would have been better off in a low-cost bond index fund. Yes there would have been ups and downs with a bond fund, but over the long term, I think it would have worked out just fine. VALIC was bought by AIG which had to be bailed out by the government in 2008 recession. 

I see you've posted that you would pull it out when you retire in about 4 yrs. Maybe staying short-term makes sense, I don't know. But it's AXA!!?? Would you move money from a Vanguard TBM fund to the AXA guaranteed 3% annuity?

 

1 minute ago, LibraryLady said:

I know what you mean. I'm having a hard time with this decision. I'm so disgusted with how these companies conduct business with teachers, I don't want to leave a cent there. Even if it's poor decision, and it probably would be, I may roll the whole thing over. I won't be touching it for at least another 10 years when I will take my RMD. 

 

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5 minutes ago, LibraryLady said:

I know what you mean. I'm having a hard time with this decision. I'm so disgusted with how these companies conduct business with teachers, I don't want to leave a cent there. Even if it's poor decision, and it probably would be, I may roll the whole thing over. I won't be touching it for at least another 10 years when I will take my RMD. 

There's something to be said for consolidating you accounts, and if you do (at Vanguard?) a short or intermediate term bond fund will probably do fine.  On the other hand, the guaranteed interest rate fund is also likely to do just what it says it will do, providing a consistent alternative to bond funds.   So neither option is wrong or bad, nor is the choice likely to make much of a difference in your ultimate nest egg.  My 2¢: pick one or the other arrangement and leave it alone, there's not much cause to worry over this one.

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Thank you whyme, I am driving myself crazy over this for some reason. For some people it would be a no brainer, but there's too much emotion involved to make a simple rational decision. So, it's time for a beer and I will see how I'm thinking tomorrow! Thanks!

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