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litlroadrunner2

Variable Annuity

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Hi,

I have been a teacher for 11 years and a single mom for 7. I have just this year found my way clear to start my 403b. There was little information available to us and I happened to have a friend who sold variable annuities. I went with that vehicle and invested 12% of my income this year. I now feel, after reading many of the posts here, like I have chosen the wrong place for my $. Can anyone suggest the best way to proceed? I obviously want to be in the best place for growth over the 19 years I have left before retirement. Is the 90-24 an option for me? Should I wait out the 5 year "surrender" fee, or just bail out into a custodial acct. now? Help........Please!

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Hi,

 

First of all congratulations on beginning the savings plan! You are better off savings something in a high cost annuity than nothing at all. First of all, check to see if the money market option also has a surrender fee. If it doesn't, then money can be put in there and transferred to a 90-24. Very few teachers would even be asking that question, so you are headed in the right direction.

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Guest Daniel Clark

Assuming you have literally just started the contract this year and thus have just a small fraction of your savings in the annuity contract, I'd suggest that the hit of the surrender charge now would be quite a bit less than the on-going hit of the high expenses that are usually in an annuity contract.

 

Of course, you have signed a contract. And as such you are bound by its the surrender and expense provisions, so you need to do the arithmetic to figure which is the best way to go.

 

The key is a comparison of the surrender hit with the hit of the contract's on-going expenses. If on-going expenses are very low (such as the case with TIAA-CREF's annuities) then you may want to keep the contract. If on the other hand the on-going expenses are high, then you probably want to consider a surrender, and perhaps and exchange to a lower expense contract.

 

What are low & high expenses? Low would be around .5% to .75% and high would be 2.5% +.

 

The other primary consideration is what alternatives you have. It may be that this is the best contract you have access to through your employer. Perhaps you could post your other options as I am certain you'd get additional information here.

 

Cheers,

 

Dan

 

 

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