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the moneyturtle team

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  1. Annie...what State are you in?
  2. Yes, a combined employee-employer contribution is allowed; sick pay can also be included...I've seen it done regularly @ retirement
  3. Annie: Just call the 800 number on your statement & tell the customer service rep that you are interested in transferring your account into a different 403(b), ask about the transfer costs & if you decide to proceed, ask them to mail you the paperwork you will need to facilitate the transfer. If you have a current financial advisor, he/she can handle that for you. Good luck!
  4. The Universal Life Insurance policy is just that: a life insurance policy. Every "deposit" you make into it is called "premium"...a portion of that amount goes to pay for cost of insurance and various administrative charges (the actual cost varies by insurance company), the remaining amount is deposited into the policy's Cash Value account where it accumulates on tax-deferred basis. The interest rate that is credited is determined by the life insurance company, typically a low percentage is guaranteed. The cost of insurance increases as you age (although your premium payment will likely remain the same), thus reducing the amount that ends up in the Cash Value account. There are also steep surrender penalties associated with these policies, typically 15 years before all penalties drop off....as far taking the money out tax-free: if you cancel the policy, what you've paid into it is return of premium (already been taxed), the balance (if any) is taxable; you can borrow against it tax-free, is that what he meant? I'm not sure why he would have recommended life insurance instead of 403(b) account....Roth 403(b) accounts are now available if you are concerned about paying taxes in retirement. I'd be curious to see what others think....do some more research before you sign up to this deal. Good luck!
  5. If you cash the account out without a qualifying event, 100% of the account value will be subject to income tax & 10% premature distribution tax. You can simply stop future contributions into the account & let the existing balance sit there & grow (hopefully).
  6. Thanks for clarifying this, pretty important to know...we double checked with the IRS also, 10% premature distribution tax applies to all distributions not listed as exceptions in Publication 575. Thanks, again.
  7. The amount you defaulted on will be reported to the IRS as a premature distribution (assuming you are under 59.5 & have no other qualifying events). Your vendor should (and probably will) send you a 1099 showing the distribution for the year it's reported. You'll then need to inclde it in your tax return for that year.
  8. Not so, qualifying hardship distributions are subject to income tax, but not to 10% penalty tax so long as they meet the IRS definition of "immediate and heavy financial need". These distributions are also limited to elective deferral amounts. Also see 10 Facts on 403(b) article posted on Motley Fool website: When can 403(b) money be accessed without penalty? Generally, penalty-free distribution from a 403(b) cannot occur until the participant: Reaches age 59 1/2 Separates from service (and must be retired) Becomes disabled Through a loan (some investment companies allow this, some don't) Suffers financial hardship Dies
  9. Steve: If you go to 403bcompare.com you can look up AIG VALIC plans...see if one of those is the one you have. Also, how long would it take you to roll it over $10,000 at a time...once you have the answer to that, you'll be able to estimate if taking the $1500 bullet is better ot not....I'm always on the side of caution...
  10. A Vanguard Roth IRA is a solid low-fee alternative. 403(b) accounts & Roth IRA accounts are fundamentally different in that 403(b) contributions are pre-tax, while ROTH contributions are after-tax. Distributions out of these accounts follow the same schedule: taxable from 403(b), not-taxable from Roth (provided it's in place long enough to qualify for Roth status). You can also set up a spousal Roth IRA for your wife even if she not currently in the workforce. Contribution limits are lower in a Roth - $4,000 per person this year vs $15,000 for 403(b). Remember, though each of you can make a $4,000 Roth contribution for 2005 until 4/17/06.
  11. Not all advisers are the same....do your homework before making any financial decision! You can contribute to both, although as it was already mentioned, both are expensive. Why did you decide to switch?
  12. Steve, VALIC typically imposes a 5-yr "rolling" surrender period. "Rolling" means all funds have to clear the 5-yr mark to be free of surrender charges. You can always leave the account with them for the 5-yr period and transfer the money when it's free & clear.
  13. All of the companies you listed as "available" are life insurance companies. That means that your 403(b) account will be an annuity, which carry a unique fee called Mortality Expense. Typically (check individual company stats), this charge hovers around 1.25% annually... It's like a life insurance benefit for your beneficiaries, you pay the mortality fee so that your beneficiary receives at least the amount of your initial deposit into the 403(b) account (some offer step-up option). In addition to the M/E charge, there are also separate account fees (mutual fund expenses) and $30 or so annual administrative fee... Although these vary slightly by company, whenever you deal with an annuity contract, it will basically offer the same options & charge similar fees.
  14. 403(b) accounts also offer a "Hardship Distribution" alternative...distibutions are subject to income tax, but not the 10% tax penalty. If you qualify, you would save 10%.
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