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apteacher

Annuities In 403b

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I dont understand how one provider can be offered In LA-LA land when you have the insurance law requirement that SD must accept all providers. LAUSD has over 140 carriers for its 403b plan. How many providers are authorized to offer their products in LACOE. 10-20 30???

 

I thought that 403b are offered through the SD not the union. How does the unoin control the choices?

 

I am not a salesman so I will not engage in any discussion with you on their practices. Besides I thought you were supposed to be nice.

 

As for the delays I noted that other posters have complained on the delay in the time between date the contributions are taken out of their pay and the date the contributions are actually deposited in their account in the fund. Maybe you are just fortunate.

 

Intruder,

 

LACOE offers many options -- 46 annuity plans as well as 22 custodial accounts through mutual funds such as Vanguard and Fidelity. LACOE is NOT the same as LAUSD. Various school districts outside of LAUSD use LACOE for their 403b plans. Here is a site that shows the options offered through LACOE:

 

http://www.lacoe.edu/includes/templates/do...nts&id=5471

 

The 403b accounts are not offered through the union, but rather through LACOE. There are many school districts that use LACOE, so the various unions do not in fact control the choices. Thank goodness.

 

Oh, and I am quite nice. :) And you are not a salesman? Come on, reveal your secret identity.

 

As for delays, I know of nobody who has experienced any beyond 15 days in the LACOE system. That is not to say that delays never occur; rather, I simply know of none. Everyone I know who is smart enough to use LACOE is quite content.

 

And Intruder, you can only envy those of us in LA-LA land -- it has been 80 degrees for the last several days. Eat your heart out!

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Ricky,

 

Thank you for your answer. If your main point is that some folks are risk-averse and are attracted by the guaranteed fixed rate of return in a tax-advantaged instrument, that is a decent argument.

 

But when you say "guaranteed rate of return," is that merely a floor beneath which the interest rate cannot go? In other words, when TSAs were sold in the 80s with initial rates well into the double digits, those rates have not remained fixed, have they? They have declined, haven't they? The rates simply cannot go below, say, 3 or 4 percent, right? So that "guaranteed rate of return" is not necessarily the same rate that one starts with, right?

 

Now, what about variable rate annuities? What would be the argument for using these rather than plain old mutual funds?

 

 

I believe it is not a decent argument because the money markets also guarantee a fixed rate of return so there is no advantage to using the fixed rate annuity especially if its with a high priced annuity provider where the declared rate will always be lower than with TIAA. The proper comparison is with two no-load fixed offerings: One being the TIAA fixed interest annuity contract and the other being the VG money fund.

 

Joel

 

 

Sorry for not responding, been busy qualifying for the Daytona 500.

 

I was just trying to give AP Teacher a single reason good/bad for an annuity in a 403b. Fixed rate of return in the annuity companies fixed account is the only reason I could come up with. Otherwise VG and Fidelity are the way to go for many people here.

 

Most annuity cos. have a floor in the contract/prospectus that the fixed account rate of return cannot go below. Usually 3% with the larger cos. Sometimes they loose money when rates are low, but your money is locked in so they win over the long term because the rates will eventually go back up.

 

You are correct that a VG money fund would be a great option because its safe and your account value should not go down and you get tax deferral as well.

 

You should not compare a mutual funds MM to an annuity fixed account.

 

The money market is fully liquid and pays a rate comparable to the current T-Bill rate (other commercial paper is used as well). So fees matter.

 

The annuity fixed rate will almost always be slightly higher than the money market, why ? Because the annuity locks your money in for a period of 5 - 12 years depending on the company. You get a better rate of return but you can't get to it, how nice is that :(

 

Lincoln 10 year CDSC, VALIC 5 year CDSC, MetLife 10 - 12 year CDSC, Horace Mann 5 year CDSC, TIAA 10 year TPA (Transfer Payout Annuity).

 

As I said before, if your money is locked in someone else is making more money than they should be, but then again nothing is for free.

 

I'm going fast again!

 

 

 

 

 

 

 

 

 

 

 

 

 

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The other issue of having your money in the GIA of a VA is that many companies will not allow for full transfer OUT of that account after you have put the money in. I know for example, that once a teacher's money is in the GIA of VALIC's VA, they can only transfer out 20% per year (of the total value of the VA). SO, if a teacher has $100K in the VA, and $40k of that in the GIA, it would take them 2 years to fully re-allocate that money OUT of the GIA if they so desired. NOT GOOD! Food for thought.

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