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Herb

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  1. Unfortunately, for your friend, she is facing a Surrender Charge. VALIC (which stands for Variable Annuity Life Insurance Co) uses a Variable Annuity--an insurance product that offers mutual funds wrapped inside an annuity. These accounts have Surrender Charges (5% per account) which expires over time (in her case 15 years) It seems that the charges are waived if she Separates from Service after age 59 and half. The Surrender Fee is in addition to the other fees associated with the account. Your friend can ask VALIC where they state the Surrender Charges. My guess is that it is in the Annuity Contract they gave her when she opened the account. If she is unhappy with the VALIC investment options, she may ask VALIC if they would permit a in-house transfer, in where her account is moved to another VALIC account with different, (better?) investment options. If they do not permit this, she is stuck with the Surrender Charges until they expire. Best wishes, Herb
  2. Herb

    403

    kak10208, You have heard what Steve has said, and you have heard what I have said. What advice makes the most sense to you? Herb
  3. Herb

    403

    Sorry, Steve, but you are wrong on this. My suggestion that kak10208 go quickly to find help legal and tax is sound and here is why: 1. Multiple tax issues; while the 40lB loan is clearly a problem, his tax problems do not end there. His post says that the investing company is suggesting a tax problem for him if he does not buy the home. The writer has dueling tax issues--the near defaulted 403 loan, and the tax problem from not buying the house. It would attractive to discuss in detail the problems of 403b loans I am sure there others here that could benefit from exploring that issue. However, the writer's second tax problem carries the discussion far beyond the scope of this public site. Even the suggestion of conferring with the Plan Administrator is helpful, but not sufficient. The Plan Adm can not help him with the second looming tax issue of the house purchase. The only recourse is professional tax help. 2. Looming Deadline; the previous employer's request that the money be returned immediately suggests that the loan is near default. A defaulted 403b loan is a difficult, and expensive problem, as you know. You also know that a defaulted loan defaults the entire loan, not just the missed payment. A defaulted payment creates a taxable event, that is difficult to unwind. The ex employer request for the money suggests that time of of the essence for the writer. He must move on this now, or his tax problems multiply. Given all this, the writer's situation is complex, and is far beyond the scope of a public site. His best, and truthfully, only reasonable option is to quickly find professional tax advice. And, he should do it now. Best, Herb
  4. MJS, I think this is root of the confusion: when you own a 403B account, you are subject to IRS rules that govern tax favored accounts established by an employer. However, when you rollover your old 403b account into an IRA, you a subject to slightly different set of rules. For example, you must meet at least one of several Qualifying Events to access your 4034b account (separation fro service, disability, death, etc) An IRA, on the other hand, does not have such an elaborate set of Qualifying Events--there is only one--age. 59 and half. Once you hit that age, you can access your account without the tax penalty. Before that magic number, your IRA distribution is subject to a penalty. Income taxes, however, will always be there for you, your spouse or anyone else that takes the account...... You can avoid the tax penalty by leaving it in your 403b account after you retire. But, you will have to invest in the invest options selected by your previous employer. And, you will have to abide by distribution requirements as laid out by the Plan Admin . One of the apparently appealing aspects of rolling your 403b account to an IRA is freedom of invest choices. This choice has to be weighed against the fact that, if you are under 59 and half, you will be subject to the tax penalty unless you adhere to the 72t Rule. IF you start the 72t Rule at 56, it will expire after you are past 59 and half. As in most things, there are compromises to be made...... I would suggest you talk to your tax professional before making any decision regarding accessing your accounts. Please do not rely on general comments you see on a public website. Best Herb
  5. Herb

    403

    kak10208, You should abide by the request of the Plan Administrator. Your efforts to buy a home seem to have no bearing on the loan agreement you have with the Plan Administrator. It is the PA who is responsible for understanding the qualifications for the loan, and the consequences of a loan default. Also, and I make this point carefully, your question is complex, and, probably, more involved then your short message. Questions like your should be taken up with the PA, and, more importantly, with your tax attorney or accountant. A public site like this is not set up to comment on or give advice about your important, complex question. People who post here often (and I dont consider myself one of them) do so to discuss strategies, successes or failures in the market. The site exits, apparently, to encourage teachers to learn about investing. But, the site is not set up to comment on real life, technical, tax related questions. A 403b professional would not undertake an involved reply to your question because he does not know enough about you, and your situation to venture a guess. I wouldn't Run to your nearest accountant or tax attorney. Best wishes, Herb
  6. DB2002, I hope you have a good talk with your employer. There is a (normal) tendency to think that retirement is about the investments. Usually so. But, in the modern 403b world, investments are trumped by Plans. With the IRS mandating compliance, employers have adopted Plans that they must adhere to. In the not too distant past, employers could accommodate most investment providers the employees wanted. Not now. And, only if they Plan permits. A key question you may want to ask your employer is this--who wrote the Plan the employer is following. The Plan is not created by the employer, it is made by the Third Party Administrator, or, sometimes, even the investment vendor. I suspect this is the case here. I would be interested in hearing back from you if have your conversation with your employer. Good luck
  7. DB2002, While your request to freeze your present account would seem reasonable, the decision may not be yours to make. Under the present IRS rules, employers must must abide by the plans that govern their retirement plans. The plans will govern what an employer can and can not do. If you wish, you may want to have a discussion with your employer. More than likely, the employer is following guidelines laid down by the plan administrator, third party administrator or their attorney. The employer may very well be telling you the truth that you dont have a choice in this matter--but, he may not have a choice either. He may be following the plan, and will do so in order not get sideways with the IRS. Herb
  8. Herb

    403B Questions

    Tony, Thanks for adding a post. I wanted the writer to hear others here--maybe that would carry some weight with him, at least I hope so. (I dont consider my self an expert on the rules of 403B plans though I am conversant and involved, there are others who post here who are much more knowledgeable than I) Thank you again for your comment Herb
  9. Herb

    403B Questions

    KGM, Good morning, I posted previously, as you may read above. You are saying that your CAN rollover from your current employer into an IRA. I would be surprised if the vendor (Great American) and your employer would permit you to do that. If you read my previous post, you will see that rollovers ( or any distributions, for that matter) are permitted if you have a Qualifying Event (detailed in previous post). If you are still employed with your current employer, it seems that you have NOT had a Qualifying Event, and, therefore, can not rollover your funds from a 403B account to an IRA. When you speak to Great American, they will send you their Withdrawal and Surrender Form. Page 2 of that form asks you to identify the Qualifying Event that permits the rollover to occur. You will have to identify the event, and sign off to that. Your employer or Plan Administrator will also have to sign off on the same form. I strong suggest you review that form. Lastly ]I strongly suggest that you research and review Qualifying Events for 403b accounts. Your employer and your vendor can provide you with important information you will want to understand before you start your rollover efforts. (If there are other professionals on this post, I ask that you comment.............)
  10. Herb

    403B Questions

    KGM: As I understand it, you can withdraw your $2,200 because your home purchase qualifies as a Hardship Withdrawal. The IRS code permits such withdrawals for specific purposes (home purchase, medical expenses, funeral, education, to hold off eviction, and casualty loss not covered by insurance). You must first check with your employer to see if the 403B plan permits Hardship Withdrawals The Plan, which was established by your employer, governs what is permitted. You may contact Great American, and they can provide the necessary withdrawal forms. Please note, you will need the signature of your Plan Administrator or Third Party Administrator. Please note, also, that if your withdrawal reason does not fall under the Hardship provision, you can not withdraw your funds unless and until you have a Qualifying Event--death, separation from service, attainment of age 59 and half, or disability. As with the Hardship provision, you will have to work with, and get the approval of, your Plan Administrator or Third Party Administrator. Generally, the Plan Administrator is a good place to start with these type of questions, as your request must apply within the provisions of the employer created Plan. I would start there. Best wishes, Herb
  11. Ok, Steve, since you are speaking to and about me, let me respond.... On your point that pension plans do not use annuities, they do. The pension that I am aware of are constructed with the intent of providing a life time income ###### to the participant. The pension is created by the employer, using actuarial projections, to invest monies during the participant's work years, with the stated objective of providing an income ###### for the participant's lifetime. The two components of an accumulation phase and a life time distribution phase ARE essential characteristics of a pension. So, as to your question about why pension plans do not use annuities, it would seem redundant to do so. A pension plan is an annuity.......... On your horror story. First, you have every right to be angry at the agent who did not follow your directions. I told you this years ago in another post. I also said to you that you should file a complaint with your state's insurance commissioner. You did not, if i recall. If a person has been taken advantage of by any professional, that claimant has an obligation to himself, his family, and his community to vigorously pursue legal remedy against that professional. You make the emotionally charge statement that 'agents will do anything for your money'. Hyperbole. That is off putting, and needs to stop. File your complaint against your agent. That is the best way to answer your horror story. You make a good case that investing in the market is good for the educated investor. You have valuable insight into what you feel are well performing instruments. But, leave off the personal, generalized, all encompassing attacks on teachers that buy annuities. Again, I give you the last word.........
  12. Here is further information: Here is the one post I found relating to Illinois VS Thomas Cooper and Susan Cooper -mentioned extensively in the Money article; www.cyberdriveillinois.com/departments/securities/administrative_actions/2010/july/seniorfinancial_anoh.pdf I am not sure if this the same complaint as the Money article, but there are some very interesting tidbits that are left out the Money piece: 1. the Coopers are securities licensed, and life insurance licensed. 2. the Coopers firm was not in good standing with the state for failing to file required tax forms with the state 3. the Coopers advertised that they would instruct potential clients on how to avoid the 'nursing home spend down'-agents can not give this type of financial advice 4. the Coopers claimed to be fiduciaries.-agents are not fiduciaries 5. the Coopers claimed they could "help clients manage their taxes and save"-agents can not give tax advice 6. the complaint states the Coopers encouraged clients to replace all or portions of their annuities and transfer the funds to new annuities. In the process, the clients suffered significant surrender costs 7. Interestingly, there are at least two case where they replaced one Index Annuity (claimant "JL" ,Item 23, and 24, and "RC", item 25, 26) with another Index annuity. Unless there is another State complaint the parallels the Money article, it is clear that is this case of Respondent misbehavior. It would be unfair to condemn all securities licensed professionals because of the disappointing behavior of this respondent. We can agree on that. It also would not be be fair to judge all insurance agents because of the Coopers alleged unprofessional behavior. Further, you can see if you read the State's own complaint that the problem is the Cooper's behavior, not the index annuity product. The State attacks and has set out to punish the Coopers. So, why is the Money piece about the product? hmmm Herb
  13. To the viewing teachers, The Money article has stirred up a lot of people in the insurance industry. For those that are interested in broader, balanced look at index annuities, please go to; wwwthesafettytrap.com This is site created by an industry group to reply to what fair minded people would consider a hatchet job by Money. If a person believes in understanding all the facts of an issue, and if they know that are fully capable of making up their own mind, then read the Money article, and then the corrections and responses. If the Money article is factually accurate across the board, why, then, are you seeing industry groups, in highly regulated industry, respond so strongly, vocally and passionately? Because the Money article is wrong.........and, regardless of others may reply to this post, that is the ONLY reason. As a retirement participant, educator and citizen, you owe it to yourself to learn. If you are educator, you value the educational process, you value the deepening of your own understanding of various issues. You resent, I am sure, being told that you are foolish, and that you know nothing about investments. You resent, further, being told that the professionals that work with you are crooks. I am sure, you resent being told these things by people that do not know you at all. So, read both sides, learn, and figure all this out for yourself. Of course you can. Best, Herb
  14. Steve, You are right, the SP can/ will/ does/ did out perform fixed annuities. But, you keep missing the point--fixed annuities (and an index annuity IS a fixed annuity) is not designed to compete with securities, mutual funds, or other instruments that can lose value. A fixed annuity ( index annuities are not called "equity index annuities', by the way) is best compared to instruments like CD's. It is designed for the person that is more interested in the return of his money, rather than the return 'on' his money. By comparing the fixed annuity to securities, the myth of a fair comparison between the two retirement plans leads to to more confusion. Steve, you do a good job of presenting your interest in the market. You do a good job of presenting the importance of education in retirement. I congratulate you for that. You cross the line, though, when you paint insurance products as 'poor' retirement choices. You dont know that, because you dont know the needs and interests of the thousands of teachers out there. If you dont know that, then, why say it? i give you the last word..........
  15. Steve, I posted Moore's correction because other teachers may want to hear another, balanced point of view. You, Steve, have made up your mind years ago. We all get that. And you know and follow the market. And, you are well versed in understanding and dealing with the risk of being in the market. But, Steve, not every teacher wants to approach his retirement as you do. Therefore, if you post an article that is factually biased, and slanted to create misunderstanding, it is in everyone's best interest to hear an clear, fact based response. Yes, Steve, there is fear being sold here--and that fear is found in the Money article, not Moore's well written, fact based correction. Consider this, Moore has written a 52 point rebuttal to Gibbs article! 52 POINTS! If i were interested in facts, I would want to read her correction. You present yourself, correctly, as a retired teacher. So am I. In the many years that I taught, I was guided by the belief that facts should out weigh emotion. And that it is important to hear both sides of an argument. In the issue front of us, Moore presents the facts to counter the fear-laced writing of Gibbs. I think this is a good thing. Don't you? Best wishes, Herb
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