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Guest Joel L Frank

The New Jersey Supplemental Annuity Collective Trust (Sact)

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Guest Joel L Frank

JOEL L. FRANK

732-536-9472


ARE YOU CONTRIBUTING TO THE, NO-COST, NEW JERSEY SUPPLEMENTAL ANNUITY COLLECTIVE TRUST?

In 1963 the State established the Supplemental Annuity Collective Trust (SACT) Variable Annuity as a voluntary way for employees to save after-tax dollars to supplement their fixed pensions. Public education employees may also contribute to the SACT Variable Annuity on a tax-sheltered basis. The SACT is very special because the law establishing the Trust mandates that the State pay all costs associated with administering the Variable Annuity. If you contribute $200.00 to the SACT...$200.00 is invested for you. This makes the SACT Variable Annuity a no-cost alternative to your high commission-based 403(b)/457(b) variable annuity/mutual fund.

 

Your high commission-based variable annuity/mutual fund is costing you about 3 percent per year. Do you have any idea how this 3 percent payment impacted the growth of your money since 1963? Example: Bob and Rob have worked in the same school district for 50 years.Every year since 1963 they have contributed 10 percent of their salary to their retirement accounts. In 1963 their salary was $5,000 and in 2013 they are earning $87,000. Both earned an 8% annual return, before commissions and fees. At the end of 50 years Bob's account balance is $743,000 while Rob’s balance is $356,000. Why? Bob invested his money in the SACT Variable Annuity, at no cost, while Rob invested his money in a high commission-based variable annuity/mutual fund. Bob never paid any commission or fees while Rob paid 3 percent every year for 50 years.

How does a retiring/separating from service particpant manage his or her SACT Variable Annuity account?

 

Most retirees choose a lump-sum settlement. If they have no immediate need for the money they rollover the earnings portion of the settlement to a Traditional IRA and the contributions portion of the settlement to a Roth IRA.

 

If the contributions were tax-sheltered then the entire lump-sum settlement is rolled over to a Traditional IRA.


I welcome your questions.

Copyright© 2013-2028 Joel L. Frank--All Rights Reserved










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Guest Joel L Frank

I changed my original post to reflect historic data since 1963, the year the, no cost, NJ SACT Variable Annuity began. Take a look.

 

Joel

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Hi Joel

 

Bear with me-I've been following your posts on the NJ SACT and have some questions. From what I understand from your past posts is that the SACT is a program with a lot of possibilities; but if only the state would offer more choices rather than one fund. When I looked at the state site during the summer, it showed information on sact unit values- is this like the share price? Do I compute the performance of the fund by treating the unit values as a share price?

 

I have been contributing to a Roth IRA with Vanguard since Vanguard was dropped from my district but I would be interested in putting pretax (at least federal pretax) money away. I was also hoping the TIAA Cref would be available by now.

 

You stated in your post that the SACT program invested in an S and P 500 type fund-where did you find that information on the state site/

 

thank you

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Guest Joel L Frank

Hi there,

 

I will respond in the body of your transmission.

 

Joel

 


Hi Joel

 

Bear with me-I've been following your posts on the NJ SACT and have some questions. From what I understand from your past posts is that the SACT is a program with a lot of possibilities; but if only the state would offer more choices rather than one fund.

 

Yes the Trust offers only a common stock fund. Some variable annuity!!!

 

When I looked at the state site during the summer, it showed information on sact unit values- is this like the share price? Do I compute the performance of the fund by treating the unit values as a share price?

 

A "unit" is used rather than a "share". The value of the unit is used to compute the value of one's account balance.

 

I have been contributing to a Roth IRA with Vanguard since Vanguard was dropped from my district but I would be interested in putting pretax (at least federal pretax) money away. I was also hoping the TIAA Cref would be available by now.

 

You stated in your post that the SACT program invested in an S and P 500 type fund-where did you find that information on the state site/

 

Under "Supplemental Annuity Collective Trust"

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Guest Joel L Frank

Is there anyone out there that has asked (or is willing to ask) the NJEA to request that the SACT Trustees offer a few more investment options?

 

This request is critical because only the pre-tax 403(b) SACT Variable Annuity will be transitioned into the pre-tax 403(b) ACTS Program. The after-tax SACT will remain. The after-tax SACT Variable Annuity is a section 401(a) plan. $52,000 will be the 2014 maximum contribution.

 

Joel

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Guest Joel L Frank

As of the last reporting period there were 488,000 active members of the Defined Benefit pension systems of the State of New Jersey. By law all of them may contribute to the SACT Variable Annuity. 3104 of them are contributing to the SACT. This is a rate of 6.3 persons per 1000 that are eligible to participate.

 

What say you NJEA?

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