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klingel33

Equitable Vs Vanguard

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I was wondering what everyone on here (this board) thought of a variable annuity company like equitable compaired to a mutual fund company like vanguard? I am wondering if one will always come out ahead taking the company that has lower cost ratios?

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One of the only reliable predictors of future fund performance is cost, and if we are talking about the standard Equitable Variable Annuity roster of funds vs. the standard Vanguard roster of mutual funds here, the Vanguard funds would be far less expensive, a margin that the Equitable investment options would be hard pressed to overcome. Think of it as a horse race, with the Vanguard horse being allowed to start 2 seconds before the Equitable horse, that's the fee that the Equitable funds would need ot overcome in terms of perfromance. On the index side, it is a margin that is impossible to overcome, because the Equitable Horse would be running at the same speed as the Vanguard horse. On the active management side it is theoretically possible for the Equitable horse to be faster than the Vanguard horse, but probably not enough to overcome the 2-second head start given the fact that the majorty of active fund managers do not outperform their benchmark indices.

 

Of couse, you would need to examine the particulars of your program. Does your plan add fees to the Vanugard arrangement? Is the AXA/Equitable contract in your program available at a lower cost than their standard program?

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I am with equitable right now and I am thinking of possibly switching to vanguard, fidelity, TIAA, or T rowe price. TIAA is the only option that is not available in my district that sounds like it has good potential. The product I am vested in through equitable is their 200 series funds. My finance guy I got set up with put me in 8 funds within the 200 series. All funds are charged a 1.34% fee for mortality and then each fund has it own cost on top of that from .67%-1.77%. The funny thing is is the one that charges 1.77% on top of the 1.34% is actually outperforming a handful of the other 7 funds. On top of all these charges I have an annual managment fee of a flat $30. I am really confused as to what to do here. I have a 13 year surrender penalty on my account which I feel is just stupid so I am tied to equitable to some extent. My current surrender is 6%. I question though if switching to vanguard or one of these other companies is really a good thing. I have read a handful of great things about vanguard and a handful where people say that vanguard is not all its cracked up to be and that it still has enough fees and performance problems. However from doing so very thorough reading I do believe that far more people are fans of mutal funds over the variable annuities in general so I fear I have went the wrong way. I went in through the advice of fellow teacher so 4-5 years ago and did not look into it and just assumed that equitable was a good deal so now I need someone who is well educated on the topic to spell it out for me and tell me am I in a decent deal or for future earnings am I just hurting myself for continuing to put more money in a dead horse if you will.

 

One thing I do need to know is it possible for AXA to outperform vanguard, fiedelity, etc.. to offset the 2% or more that they are charging for their load/brokerage fee?

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Klingel,

 

 

With all due respect you seem to be rationalizing your decision to stay with equitable. Look, you are paying way too much for your funds. With that kind of weight around their necks your funds will NEVER grow all that well. You will be treading water for your entire working life. Its a fact. The extra fees kill the compounding effect. You probably own crummy funds too .

 

 

Vanguard in a recent Forbes issue had more funds as best buys than any other fund company. They have a superior lineup of both managed and index funds in all categories at rock bottom prices. If you are hearing that their funds are not all they are cracked out to be, its probably because someone either doesn't know what they are talking about or are deeply threatened by their low cost philosphy. Sure, they have some losers in their line up like Vanguard U.S. Growth but overall they aren't the second or third largest fund company for nothing.

 

At this point I want you to think for a moment: Why are you in an annuity in the first place.? Do you even know? Or was it something a salesmen talked you into. How is it fair that you must now pay a surrendar fee to swithch over to Vanguard. How does that make you feel about equitable? Vanguard by the way has no surrendar fee.

 

I will repeat my advice. Quit the insurance annuities while you are still young, bite the bullet and pay the surrendar charge and move the money to any of the mutual fund companies you mentioned. Stay the heck from all insurance companies pedaling retirement products.

 

No, long term I find it hard to believe equitable can outperform those great fund companies!!!~

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My finance guy I got set up with put me in 8 funds within the 200 series. All funds are charged a 1.34% fee for mortality and then each fund has it own cost on top of that from .67%-1.77%. I have a 13 year surrender penalty on my account ...

 

One thing I do need to know is it possible for AXA to outperform vanguard, fiedelity, etc.. to offset the 2% or more that they are charging for their load/brokerage fee?

 

Klingel,

 

A Vanguard target retirement fund charges about .20%. You are paying between 2% and upwards of 3%. Do you understand the huge drag that such charges place on your returns?

 

Let me put it another way: You are paying between 10 and 15 times what Vanguard charges. Has your salesman (NOT A "FINANCE GUY") justified the cost differential? Has he provided incremental value that justifies the added costs?

 

Lastly, yes, it is certainly possible for AXA to outperform the low cost providers. The question for you to ask yourself is, how confident are you that AXA will do so?

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Lastly, yes, it is certainly possible for AXA to outperform the low cost providers. The question for you to ask yourself is, how confident are you that AXA will do so?

 

 

Ap,

 

How is it possible?

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Guest Skeptical

Klingel,

 

Do not fall for the mental barrier created by Equitable, specifically the 6% surrender charge applicable for 13 years. This is a minor financial burden that you incurred each time you paid premiums on this annuity. Funny how the surrender charge ( 6% of premiums) is so close to the amount the agent receives in commissions ON EVERY SINGLE CONTRIBUTION.

 

I've run these numbers in a spreadsheet to confirm, but if you think about it for a minute it's pretty simple: How many years will it take to recover the 6% penalty? If you reduce your investment expenses by 2% per year (eliminate the 1.34% mortality expense AND reduce fund expenses by .66% which is easy to do with Vanguard) it takes well about THREE years.

 

DO NOT FALL FOR THIS SURRENDER PERIOD SCAM AND WAIT ONE MORE DAY!!!

 

You will never make it up by waiting, you'll just put more money in the retirement accounts of the insurance company sales agents.

 

Best,

 

Jim

 

 

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Hey Jim,

 

 

Its amazing what a foothold these insurance companies continue to have on teachers. Thanks for all you do to expose the fraud that goes on in the financial industry. My good buddy part time teacher/horace mann rep is in Greece on a free vacation becuase he did such a good job selling sub-par and expensive retirement products to unsuspecting teachers. He got the vacation and they got the shaft.

 

 

Tony

 

 

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Thanks Tony. You can view the spreadsheet here on googledocs. There is almost never a good reason to wait for the surrender period to end. These are arbritary time periods that are designed to keep participants paying EXCESS expenses for as long as possible.

 

Cheers,

 

Jim

 

 

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Lastly, yes, it is certainly possible for AXA to outperform the low cost providers. The question for you to ask yourself is, how confident are you that AXA will do so?

 

 

Ap,

 

How is it possible?

 

Tony,

 

Yes, it is possible if AXA has either brilliant or lucky fund managers. Possible, I say, but not very likely. Choosing between AXA and Vanguard has got to be one of the easiest of life's decisions to make.

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DO NOT FALL FOR THIS SURRENDER PERIOD SCAM AND WAIT ONE MORE DAY!!!

 

You will never make it up by waiting, you'll just put more money in the retirement accounts of the insurance company sales agents.

 

Best,

 

Jim

 

Jim,

I have just surrendered my variable life insurance policy with AXA... felt good! Next will be my wife's and then her 403(b). Enrollment form for 457 plan is in the mail. I am drafting a complaint letter to AXA CEO and to New York State Dept of Insurance. Our so-called AXA advisor tried to sell us both a second variable life insurance policy at the expense of our retirement accounts.

 

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I have talked to my finance guy and all he can say is he believes AXA will appreciate better than Vanguard. I have called AXA direct and found out that my surrender charge will be in excess of $1,400 not to mention my account will be cashed out as of the close of the market yesterday for $1,227 less than I have put in. I thought I read something on here once that said that that is one of the if not the only perk of a variable annuity that if you account is less than what you put in you are protected when you cash out in the fact that the variable annuity company will at least give you back the amount of dollars you put in. On the phone I was told this is not the case. Not sure what that extra layer of charges meaning the 1.34% for mortality and all that other stuff is for but apparently it does not allow you to cash out for what you put in. I have one more quick question and that is does the rule of 90-24 (not sure if those are the right numbers) allow me to go ahead take the $1400 surrender loss and have that be my only hit or will the feds step in an give me another hit of some kind? I plan on leaving it all the same just switch companies so they will both be 403b's the only difference would be the old one is a variable annuity thorough AXA while the new one is a mutual fund through Vanguard. Some of you may get a kick out of this as well but through AXA when I close I also have a $8.52 administration charge???? Maybe my agent is like someone else said earlier going on many all expense paid vacations. I know one thing me being a teacher I sure am not!

 

Lastly I can take 10% out a year penalty free would it make better sense to do this? Would waiting ten years be better or is just paying the penalty better. Also is my agent just full of it when he says AXA will more than likely outperform Vanguard? Thanks for all your input from everyone I like hearing what other people out there know rather than just having to hear my agent opinion because maybe his interests are not my best interests.

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in my opinion it would make the most since to open a new 403b with Vanguard and roll the axa account over. bite the bullet, if you leave the account there you will be paying a $30month admin fee for a low account balance (less then 25k) for the life of the axa account. you question about you getting back what you put in, that only happens when you die. Not a great deal for you :).

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How about my wife and I getting duped and put into a Nationwide Best of America IV variable annuity when she has Vanguard on her vendor list. Then, when I asked my financial advisor about it he said he needs to make money too, can you imagine? Needless to say, just wanted to put in my two cents!

 

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DO NOT FALL FOR THIS SURRENDER PERIOD SCAM AND WAIT ONE MORE DAY!!!

 

You will never make it up by waiting, you'll just put more money in the retirement accounts of the insurance company sales agents.

 

Best,

 

Jim

 

Jim,

I have just surrendered my variable life insurance policy with AXA... felt good! Next will be my wife's and then her 403(b). Enrollment form for 457 plan is in the mail. I am drafting a complaint letter to AXA CEO and to New York State Dept of Insurance. Our so-called AXA advisor tried to sell us both a second variable life insurance policy at the expense of our retirement accounts.

 

 

 

The CEO will laugh at your letter sorry to say and the New York Department Of Insurance is powerless.

The CEO will just say the employee is doing his job which you know is to make money for the company

primarily with the investor being of secondary consideration . You might as well write a letter to the SEC

too. In the financial environment, its definitely CAVEAT EMPTOR-let the buyer beware!

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