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Aig Valic Profile Retirement Program

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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.

 

 

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I am getting worried that this may end up being our chosen plan. Yesrday everybody got a Valic twelve inch ruler in their mail box. Also these rulers are all over the school.

 

Say it aint so.

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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.

 

 

 

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.

 

 

 

 

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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.

 

 

 

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

 

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When I read the prospectus, the one concern I had was that the bond funds were expensive- the expense ratios were above 50 basis points. Some were around 80 basis points.

 

 

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.

 

 

 

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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.

 

Does this plan have a specific name or account type? We've still had no luck in finding a bearable 403(b) in my wife's school district, and if this is on the level, I'd like to check it out (and to make sure that I ask for the exact right thing, since that seems to matter when you're dealing with these retirement plan salespeople).

 

...never mind, just noticed that the name of the thread is the name of the program. Apologies.

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If in California I advise my clients to use the CalSTRS Pension2 program (disclosure: I helped develop it). The index funds offered in it are almost as low cost as the "VALIC" ones - they are Vanguard index funds, usually either signal or institutional shares plus 33bps. They have a low cost bond fund and a fixed account that is paying 4.5% completely liquid with a 3% floor. They have a great "direct invest" real estate fund and for those of you who want to take passive management to the next level, they offer the DFA Global Equity Fund (of which I recommend for your equity allocation) and for those of you who want active management......Dodge and Cox stock and international is also available.

 

Instead of paying another .50% for VALIC's wasteful GPS service, participants could elect an "Easy Choice" portfolio that combines risk preference with a target date concept - the average cost is about 60bps (it lower the more bonds, higher the more stock).

 

I never advised clients to go with the CalSTRS 403(b) plan as I thought it was too expensive, now I think its the best plan for participants in California - it beats the pants off of VALIC's alternative. I fully admit I am biased toward this product and that I got paid to help develop it, but I don't get paid to sell it - not a dime. I don't make any more or less money to recommend this plan (I still do consulting work for CalSTRS), its just damn good. CalSTRS is also committed to lowering the fees the higher the assets - something you won't find at VALIC or anywhere else.

 

Don't take my opinion, research the product yourself and make your own decision.

 

ScottyD

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When most of us get stuck without access to Vanguard or Fidelity, will this be a viable option if I'm looking to use low cost index funds. Does anyone know with certainty what the fees are for the self managed account not the Guided Portfolio Service.

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When most of us get stuck without access to Vanguard or Fidelity, will this be a viable option if I'm looking to use low cost index funds. Does anyone know with certainty what the fees are for the self managed account not the Guided Portfolio Service.

 

 

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.

 

 

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