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Everything posted by VAteacher

  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.
  14. Hello, I was recently told by the benefits person at my school district that starting in a couple of months, we would be able to start contributing to the Valic "Profile Retirement Program". I've looked at the Valic web page and see that one can invest in no-load mutual funds. These are listed within the "Valic company I Prospectus" and "Valic Company II Prospectus". It appears that for a 457b or 403b account, there is a standard $40 account fee and the ER from the mutual funds one invests in. Other than this, there don't appear to be any additional fees. This appears to be a decent option, as the index funds (Small, Mid, and S&P) have ER's between .35% and .43%. Is anyone currently contributing to Valic's profile retirement plan? If so, am I missing anything in terms of fees? Thanks!
  15. Where did the salesman (intruder) go? Please continue to post here on this forum.
  16. Nice topic apteacher... here's my story. In early 2000 I was half way finished with my 1st year of teaching. Fellow teachers recommended that I sign up for the school system's 403b plan with Valic (there were no others available). So, I met a Valic advisor (salesman) who happened to be from my hometown... he did his best to buddy up and use this to his advantage. I was clueless about investing at the time. I started a variable annuity, but did not even know it was an annuity. He put me into a large cap growth fund based on its high performance between 1995-2000. If this was not performance chasing, I don't know what is. And I imagine he was advising the same to all of his other victims. That was the absolute worst thing I could have done! From that moment on large growth dropped 57% over the next 3 years. Add Valic's high expenses to that, and it dropped much further. I finally saw the light 2 years ago and transferred everything to a Vanguard 403b. I hope others do not have to go through the same thing. In this situation, I actually paid lots of money for the most horrible advice I could have ever received! I grew up in a family that was well off but financially illiterate in many ways. Pair that with working with teachers who were clueless about investing and things like this happen.
  17. TR1982 wrote: You know what? I think I'll use the term I want to use. If people here can call themselves teachers, then I can call myself an advisor. As you well know, possessing an education degree or a teachers license does not make you a teacher. Teachers are called teachers because it's their job to be a teacher. However, the same does not apply to your job. Your job is to sell, not to advise. Perhaps in the future you will think more carefully before posting.
  18. Hello, I have read that one can withdraw funds from a 403b starting at age 55 IF the employee seperates from service (retires) at that point. Is this true? The reason I ask is because at my employer's website on 403bs, it implies that one can only make withdrawals prior to age 59 1/2 penalty free if the employee is disabled. Here's where I got confused: http://www.fcps.edu/DHR/employees/benefits/403b.htm Thanks, VATeacher
  19. Having moved my 403b account from Valic to Vanguard a year ago, I don't particularly like Valic either (to put it nicely). My school system is considering Valic's offer to have the "profile retirement" plan as well. If you go to the Valic website and search for this, you can get a list of no load funds by clicking on "performance" after "profile retirement program". It appears that the expense ratios are listed under the Valic company I and II prospectuses. Are there other fees? I personally don't know. If not, this "could" be a decent product, as the S&P 500 index fund has an ER of .35%, small cap index .43%, and so on. But this seems strange coming from an insurance company, so I'm very skeptical as well. My school system's stance on this is that because Valic is already an approved provider, an RFP would not be necesary. Apparently with this new plan by Valic, they would comply with the new 403b regulations.
  20. What do you do when annuity salespeople come to your school? Recently some salespeople from a large insurance company came and "camped out" in a central office location of my school. It was advertised as a "retirement party" with candy, drinks, etc. The principal sent all employees two messages informing them of the "party". Thus, it appeared that the salespeople ("financial advisers") were being endorsed by the leader of our school. Personally, I get so angry that I do not even want to talk to these salespeople. Talk about a self-serving, dishonest job. It's necesary for annuity salespeople to mislead potential customers in order to sell their product, plain and simple. Do they mention that you'd be better off investing in a taxable account instead? Of course not.
  21. I called my school district's Valic salesman about this new plan two weeks ago. He didn't have any information on the plan and said he would do some research and mail me some information. I still haven't received anything... I'll post on the board when/if I find something out. And yes, reading everything for fees will definitely be a must.
  22. I imagine the reps do their part to convince school districts that it would be crazy for a company not to sign a hold harmless agreement. Why wouldn't they? They have a strong sales force that participates in RFP's. The big insurance companies such as Valic, ING, and Metlife are willing to sign because they can take on a little more "liability" because they bring in so much $ in terms of fees. Low cost companies like Vanguard have decided they are not willing to sign such agreements because they may not be able to maintain their low cost structure. Yes, that's a good point about having strong thinkers/good leadership. This probably contributes to districts getting low cost plans that put the employees first, not the high cost insurance companies.
  23. In my years of teaching I have worked in 6 different school districts. I can't help but notice and look back on the fact that the better school districts I worked in had lower cost companies for their 403b and 457b plans. For example, the most progressive and supportive school district I worked in just happened to be the only one that has Vanguard as a 403b provider. Is this a mere coincidence? It may not be exactly that simple, but somehow, I don't think it's just a coincidence. I would go so far as to say that, generally speaking, many of the districts that offer its employees better 403b and 457b companies happen to be better places to work, with higher quality teachers. Higher pay is probably a factor as well. Many school districts are unwilling to have a low cost mutual fund provider such as Vanguard simply because Vanguard will not sign a "hold harmless" agreement. In such cases the school district is not putting the best interests of its employees first. The conclusion I take from my own personal experience is that you can tell a lot about a school district by looking under the hood and finding out what companies are used with their 403b and 457 plans. Anyone agree/disagree?
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