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VAteacher

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  1. Hello, I have found conflicting information on when distributions can be begin from 403b accounts. According to some sources, such as the 403b FAQ on 403bwise, I read that, in order to take distributions before age 59 1/2 penalty free, you have to separate from your employer (retire/quit) in or after the year in which you reach age 55. However, according to my recent 403b custodial account agreements I have with Vanguard and Valic, and what I've found on the IRS web page, it appears that you can start distributions at ANY AGE prior to age 59 1/2, as long as you have separated from your employer. Nothing about age 55 is indicated at all. Perhaps this is the up to date rule, as changed starting Jan. 1, 2009. Does anyone know what the truth is? After separating from your employer, can you withdraw funds from your 403b penalty free at ANY age? thanks, VAteacher
  2. hello, To make a long story short, I have contributed an excess of $3,200 to a 403b plan for tax year 2008. I had already contributed $15,500, the maximum limit for me (I'm 35) to a 403b for 2008. I have looked at the IRS web site and if I read the rules correctly, it looks like I can simply withdraw the excess contribution ($3,200) before April 15 and there should be no federal penalty. Is this correct? Thanks, VAteacher
  3. Thank goodness there is a place where any teacher can come to seek information about 403b plans. Most teachers are clueless about investing and whether they are even contributing to an annuity. The worst advice I ever got was from fellow teachers I worked with and trusted in the past. Most of them were in the dark just like many are. Because of the internet and wider availability of information, one can find the truth. The annuity salespeople will be the last ones to explain to teachers the devastating effect annuities can have on a person's financial well being, especially if they start contributing at a young age.
  4. Understanding: You say that the safest way to invest in the market is through annuities. That is what annuity salespeople say again and again to sell their products. That degree of "safety" comes at a huge cost to the investor. If an investor saving for retirement is concerned about safety, they can simply invest in a low cost no load bond mutual fund, up to 100% of their asset allocation. Here's an example: Vanguard Total Bond fund (expense ratio .19%) vs. AIG Valic Strategic Bond Fund (variable annuity wrapper fee 1%, plus mutual fund ER of .89%, equals 1.89%, plus a 6% surrender charge on top of that) The AIG Valic variable annuity is typical of most annuities, and some companies charge even higher surrender charges, etc. Please explain to me why anyone would want to pay 10 times as much for an investment, espcially over the course of many years. And that's not even including potential surrender fees. Annuities don't make sense for the majority of investors.
  5. Your grandma may have built a new deck with annuities, but with no-load mutual funds may have built a new deck and a new house. Well said, Jarhead. That sentence should be in an investment book somewhere, shouldn't it?
  6. Eagle, I think you will find that the difference between Nationwide and Vanguard is like the difference between night and day in terms of cost/value. There is a reason why Vanguard did not approach your wife... their products are not sold by salespeople working on commission. Your wife could transfer her Nationwide account to Vanguard, but she should check for any surrender fees associated with Nationwide and see just how much more she is paying in expenses. VAteacher
  7. I'm looking at the contract right now, and for the self managed account there is: 1. a $20 annual account fee 2. the expense ratios of the mutual funds you invest in. But don't take my word for it, look at the contract and ask Valic yourself. I did some research on the SEC filings of Valic's index funds to see if their ER's have decreased over the past several years. I was pleasantly surprised to see that they have decreased a little. But don't take my word for that either, you can do the search also.
  8. True. Their international fund isn't great either. Their international equity fund underperformed its benchmark (MSCI EAFE index) by 1.61% over the last 10 years. Most of the Valic funds have high turnover and frequent changes in management. I plan to only use thier index funds and hold international and bonds with Vanguard in an IRA.
  9. Unless you are buying directly from the source/fund co. , there is always an extra fee. The annuity co. is the middle man. What are the fees of their higher cost funds? You only gave the lower cost funds, and they are indexs so they should be low. Also, are they offering/pushing the Guided Portfolio Services management option. That usually adds an extra .5% on top of the other fees. On the application for both the 403(b)(7) and 457(b), there is a place where you can pick: A. I choose to enroll in the Guided Portfolio Services (GPS) Portfolio Management Services OR B. I choose to determine my asset allocation strategy, select my investments and monitor and manage my assets myself. There is an additional fee for option A but not for option B. So, if you pick option B there are no other fees in addition to the expense ratio of the mutual funds and the $20 yearly account fee. Most of the Valic funds are actively managed and have expense ratios around 1%. If you look at the prospectus closely you'll notice that over time, their actively managed funds don't even come close to matching their benchmarks. But the lower cost index funds look decent, mainly because cost determines return. Here is a list of the funds with ticker symbols. You can look up the funds at morningstar.com by plugging in the ticker symbols. http://www.aigretirement.com/Images/Profil...tcm82-28133.pdf
  10. Some people here (including myself) have asked about this new offering from AIG Valic in which one can invest directly in no-load mutual funds. This week I met with an AIG Valic salesman and have reviewed the contracts for both their 403(b)(7) and 457(b) plans. One can invest in Valic no-load funds through both plans. As far as expenses go, there is a quarterly fee of $5.00 and the expense ratios for the funds. There are no surrender charges. The paperwork says "Financial advisors are paid a set amount for enrollment of each client. The commission is paid by Valic and this amount does not reduce the account contributions." Here are a few of their lower cost mutual funds with expense ratios: Stock Index fund (ER .35%) Mid Cap Index fund (ER .38%) Small Cap Index fund (ER .43%) In my school district, this is the best plan currently available. I plan to consolidate and contribute to both plans. This is by no means a sales pitch for AIG Valic, but this is quite refreshing considering AIG's history of expensive annuity products with surrender charges.
  11. Hi Jarhead, Your wife is very fortunate to have both Vanguard and Fidelity as vendors. This is probably the best benefit she could have, with the potential to save hundreds and thousands of dollars in the years to come. She can contribute directly to the lowest cost stock and bond mutual funds in the investment world!
  12. If you go to AIGretirement.com and click "investment products", then on the left "mutual funds", then "profile retirement program" you can see links to a list of the no load funds (with ticker symbols) offered in 457b and 403b plans. It looks like there is an annual $40 account fee. You can download the prospectus to see the expense ratios for each fund. It looks like they have a S&P 500 index fund with a .35% ER, Mid-Cap Index fund with an ER of .38%, and Small Cap Index fund with an ER of .43%. This week I am meeting with an AIG salesman to get the paperwork for this new plan that they are offering. I plan to read all the fine print in the contract. I'll post back here with what I find out, as I suspect there may be more fees involved in addition to what is shown on the AIG web page.
  13. I've really enjoyed reading this thread! Back to the original article that was posted. In the past, asset classes have tended to have down periods and up periods. If we can learn anything from history, one might conclude that there is a good chance that the S&P 500 will do well in the years to come. If one follows the author's train of thought, one might even conclude that now is the time to buy stocks in emerging markets, energy, and gold because they have performed well this decade. The author failed to mention the bottom line: to diversify one's investments into asset classes, keep costs low, and realize that there will always be down and up periods for asset classes.
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