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fireman44

Supplemental Annuity Collective Trust Of New Jersey (Sact)

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Hello everyone. I just recently found out about this Supplemental Annuity Collective Trust (SACT) that New Jersey offers. I wanted to start a discussion on this SACT. I am in the early stages of my research. I will share everything I have learned thus far. I am hoping some other people from New Jersey have experience or advice, or if anyone else has ever researched it or is interested in looking through the information.
My ultimate goal is to see if it's worth investing in. Information is very limited online about the SACT and trying to track down the stocks they invest in is tough.

Eligibility: Employees who are actively contributing members of one of the following state-administered retirement systems are eligible to participate in SACT Regular.
Judicial Retirement System (JRS)
Teachers’ Pension and Annuity Fund (TPAF)
Public Employees’ Retirement System (PERS)
Police and Firemen’s Retirement System (PFRS)
State Police Retirement System (SPRS)

{The SACT plan is a 403(b)}
The SACT-Regular Plan allows contributions in whole percentages beginning at 1 percent of your base salary. The maximum contribution allowable falls under the $53,000 IRCAIS limits for 2016 (includes Pension 414(h) contributions). Lump-sum contributions of $50 or more are allowed in the third month of any calendar quarter. Although your contributions to the regular plan are "after tax contributions," your accumulated earnings are deferred from federal tax until you withdraw your money.

"The Supplemental Annuity Collective Trust provides a variable annuity as
opposed to the fixed annuity benefits of the State administered retirement
systems. The fixed annuity benefits of these systems provide a guaranteed
amount regardless of economic conditions and the performance of underlying
investments. However, over time, inflation will erode at least a portion of
the purchasing power of these fixed benefits. By supplementing your retirement
system benefits with a variable annuity from the Trust, you have the
potential to increase the amount of your retirement income through the appreciation
of the underlying investments of the Trust"

http://www.state.nj.us/treasury/pension ... handbk.pdf
( This link gives all the basic information on the SACT)

The profits they list are in Unit Values. The last year they show is 2013.
http://www.state.nj.us/treasury/deferred/sact.shtml
July 2013 75.3337
June 2013 72.1644
May 2013 73.3738
April 2013 71.8395
March 2013 70.7088
February 2013 68.2962
January 2013 67.6088
December 2012 64.6331
November 2012 64.4278
October 2012 64.2862
September 2012 65.7004
August 2012 64.2602
July 2012 63.1320
June 2012 62.5365
May 2012 60.2980
April 2012 64.0390
March 2012 64.5729
February 2012 63.2730
January 2012 61.5859
December 2011 59.6947
November 2011 59.1500
October 2011 58.9901
September 2011 53.6614
August 2011 57.5872
July 2011 60.9810
June 2011 62.3742
May 2011 63.5929
April 2011 64.3139
March 2011 61.2140
February 2011 61.3458
January 2011 59.5480
December 2010 58.6890
November 2010 55.9697
October 2010 56.1529
September 2010 54.7458
August 2010 51.1929
July 2010 52.8842
June 2010 50.1476
May 2010 52.6003
April 2010 56.4044
March 2010 53.8407
February 2010 51.8363
January 2010 50.4984
December 2009 51.9323
November 2009 51.1409
October 2009 48.4146
September 2009 49.2613
August 2009 47.7934
July 2009 46.9180
June 2009 44.2856
May 2009 44.8538
April 2009 43.0230
March 2009 40.9865
February 2009 38.3128
January 2009 42.4718
December 2008 45.2130
November 2008 44.1957
October 2008 47.0543
September 2008 55.6247
August 2008 60.3652
July 2008 59.4224
June 2008 59.8911
May 2008 66.1912
April 2008 65.2104
March 2008 62.1107
February 2008 63.0920
January 2008 64.3912

Now here are some links I found wrote by Joel Frank in favor of SACT
http://board.403bwise.com/index.php?showtopic=5716
http://board.403bwise.com/index.php?showtopic=5410

Now it seems like all fees for this are covered by the state. But KROW36 from here on Bogleheads questions that.
viewtopic.php?t=179734

"I believe that although the fees of the SACT fund are not disclosed, they exist, and are subtracted from the unreported but calculable rate of return (ROR). Every mutual fund, or portfolio of mutual funds, has expenses. The SACT fund expenses are subtracted out of its returns before they report their "unit values".

KROW36 also compared the SACT
"I also found the Unit Values page for the Supplemental Annuity Collective Trust (SACT) but was hoping they provide the rate of return over the years. Maybe they aren’t all that proud of their ROR? I used the unit values for December for some recent years and calculated the ROR. For a comparison I used Vanguard’s LifeStrategy Moderate Growth which uses a 60/40 asset allocation and includes International stocks and bonds. I noticed that the unit values for 2013 were incomplete and 2014 was missing.

-----------SACT ROR——LSMG ROR
2012————8.27%——— 11.76%
2011————1.71———— 0.26
2010————13.01——— 13.31
2009————14.86——— 20.33
2008———— -34.13—— -26.50
2007—————0.33——— 7.36
The SACT is very opaque, and doesn’t seem to outperform a diversified index fund portfolio."

"I calculated a few more years of the ROR of the SACT fund and compared it to the ROR of the Vanguard Life Strategy Moderate Growth.

SACT.------SACT ROR——LSMG ROR
2012——— 8.27%—— 11.76%
2011——— 1.71——— 0.26
2010——— 13.01—— 13.31
2009——— 14.86—— 20.33
2008********* -34.13***** -26.50
2007——— 0.33—— 7.36
2006——— 11.85—— 13.31
2005——— 4.35—— 5.69
2004——— 8.21—— 10.57
2003——— 23.56—— 22.40
2002******** -27.47** -10.32
2001******** -12.04** -4.48
I would steer clear of the SACT fund 403b because of The significant outperformance over time of the Vanguard fund over the SACT 403b"

now when i googled SACT NJ STOCKS i finally found their investments

http://www.nasdaq.com/quotes/institutio ... -nj-820828

http://www.octafinance.com/hedge-funds/ ... ust-of-nj/

a 2014 audit:
http://www.state.nj.us/treasury/pension ... act-14.pdf


sorry to throw so much information out there.
I tried to organize all this information the best I could and give a good presentation.
I am trying to figure out if the SACT is really worth it for me to invest in.
I am opening a 457(b) plan with Valic (the best sponser my company offers) but I just found out about this SACT.

Thank you all for reading and any information or advice you may have on the SACT of NJ

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OK, I'll bite.

I don't know anything about the SACT NJ. I thought Tony would respond as I believe he knows about SACT NJ.

Other comments:

  1. Past performance is not important.
  2. If you cannot get the fund choices, the asset class and the ER, there isn't much we can respond too. We need this information so we can construct a balanced diversified portfolio.
  3. I noticed on one of your links the form is dated 1999.
  4. Forget about the specific sponsor for a minute. What is your question? And then a discussion might ensue.

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Fireman44, I'm online only occasionally this summer and just spotted your thread. I don't envy you trying to decide whether SACT is worth using or not. My guess it's a "black box" designed to make money for the financial industry. SACT earns a return but takes a greater risk than a VG balanced fund like their Life Strategy fund of funds.

 

You might be better using a mutual fund product with VALIC (not an annuity product!). You'd know the expense ratio and other fees.

 

A further problem you need to consider is that NJ doesn't let you defer your 403b (and 457b?) contributions from your income. It seems to me that a big advantage to contributing to tax-deferred accounts isn't there for you.

 

I think a taxable account for retirement at VG has some advantages over deferred accounts for NJ residents that you should consider.

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Thank you for your responses Sschullo and Krow36.

My initial question was to see if This SACT was worth investing into.

A little background on me which I failed to provide.

I am a professional firefighter in New Jersey. I have 7 years on the job and after 25 years I can retire and collect a pension. ( 65% of my last year completed salary )

Now the pension system is underfunded and there is a lot of worrying by NJ employees that our pension will still be available the way it is written up now.

 

My wife is pregnant with our first child and is due in October. So this has really woken up in setting up a life insurance policy on myself and on my wife. And setting up retirement accounts.
I will be turning 31 in August and I will be 48 when I complete 25 years with the option to retire.

 

457(b) is available in my city. Metlife, AXA, and Valic are the options and all are annuities based. After gathering all the information, Valic is the best option. Having the lowest fees and Vanguard available as an Investment Option.

 

The fees on VG LifeStrategy

Acquired Fund Fees - 0.15%

Total Fund Fees - 0.15%

Net Fund Expenses - 0.15%

Net Separate Account Fees - 0.65% ( This includes the mortality and expense fees)

Total Net Variable Account Account Option Fees - 0.80%

 

I don't know a lot about fees but these don't seem very bloated and are lower then the majority of options from AXA and Metlife.

 

Currently I have been dumping all my money into a credit union that offers 3% saving accounts and compounds daily. I always thought I wouldn't need any retirement accounts with this guaranteed 3% interest. But everyone says it is good to diversify. Which is why I was going to do a 457(b) and also thinking of investing in the SACT. I don't know a lot about Ira and Roth Ira. The main thing that attracts me to the 457(b) is tax deferred and I can withdraw all my money if I decide to retire at 48 years old. IRA and Roth IRA i believe you must be 59 to pull your money out.

 

 

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Fireman

 

You need to hang around this site and learn all you can about investing. At your age you should be mostly in stocks. You are right to say you need to diversify. A bank won't help you get over the hump for retirement. You should save as if you won't get a pension because one never knows the future. Better to be safe. Too many folks I have known in education count on their pensions and don't save. I always ask them: "What if the pension was taken away from you or reduced? How would you make it? Better to cover all your bases. And yes you and your wife should have life insurance. Go with term insurance. Does your local city employer offer you any investments options or insurance options?

 

In your situation currently, after having enough liquid savings in a bank or money market savings account, I would invest directly in a Roth IRA through Vanguard. Your wife may be eligible as well. You can read more on Roth accounts on this site.

 

Keep saving and keep learning but beware of financial advisors unless they are fee only and with a reputable organization. Stay away from insurance companies that pedal annuities. Use insurance companies only for insurance and not investing.

 

Tony

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Fireman,

Any LifeStrategy funds are popular these days as the managers rebalance the holdings as you get closer to retirement.

 

BTW, what credit union pays 3% on its savings account?! It must be some type of stable value, or some kind of agreement.

My credit union and 99% of savings accounts everywhere else is paying something in the order of <.05%.

 

Steve

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Hey Tony,

 

Thanks for the tips and advice. I definitely will be hanging around this site to learn more!!

My city just offers the 457 (b) plan through those three options I listed and the SACT I talked about in my original post is offered by the State.

 

I see myself bouncing from the 25%-28% tax brackets through the rest of my career. (depending on if my wife is working or not in certain years, filing jointly)

I would retire and have a lower salary through the pension then I did while I was working. However, the tax brackets will pretty much almost be the same or slightly different.

So based off that theory I would assume the traditional IRA is more aligned towards my situation. And a negative would be that I couldn't touch the money until I am 59. On average, professional firefighters don't live very long lives.

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Steve,

It's a credit union in my city. They are constantly giving out loans to city workers for 8% or 9% and that is why they can offer a higher interest rate in the savings.

What did you think of the fees I mentioned by Valic for the 457 (b) plan? For that VG LifeStrategy investment.

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Fireman44

 

I have been trying (and accomplishing ) to consolidate most of my funds into The Life strategy moderate growth fund which has a 60-40 allocation. All in index funds. Outside of this I am buying only extra bonds . I am trying to have only two fund-four funds total. You will be paying much more for the Life Strategy than I am. I am paying .15% total and you should not have to pay .80% for the same fund. I realize your options are limited. Thats why you should go direct with an IRA first before considering what to do next.

 

Thank-you for being a firefighter. You guys don't always get the attention and respect you deserve.

 

 

Tony

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Steve,

It's a credit union in my city. They are constantly giving out loans to city workers for 8% or 9% and that is why they can offer a higher interest rate in the savings.

What did you think of the fees I mentioned by Valic for the 457 (b) plan? For that VG LifeStrategy investment.

 

Hi Fire,

Yeah, but don't all credit unions give out loans or other expensive services? When I have a check that draws from my overbalance account, wow, they charge a lot! Obviously, I am very careful about using that service.

So whatever reason, you are fortunate. I would use it for a portion of your fixed account. All portfolios, no matter what your age, should have a portion in fixed accounts. Sure bond funds might pay a little more, but there are interest rate changes which add risk that is not in a savings account.

 

Talk to a VALIC rep and ask him or her about the total fees that you will be paying. Remember, these folks are under no obligation whether legal or not, to be transparent about fees. The vast majority of reps tell you a portion, but not the entire picture. For the information you gave, it looks like its a variable annuity with M&E fees. M&E fees are a totally unnecessary cost to protect your investment (that's the sales pitch) but its really a total rip off. For that reason alone, it doesn't look like a good option because of the fees in just about all variable annuity contracts. The only low cost VA is from TIAA.

 

Keep looking and tell us what you found. You are looking for funds that diversify your portfolio. Look for a new thread that I will start where I show my portfolio, and what a fully diversified portfolio looks like. As I said in another post, I got a 4.7% return YTD.

 

happy 4th,

Steve

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Thank you for the kind words Tony.

Steve these are the fees for VALIC. The fees on VG LifeStrategy

Acquired Fund Fees - 0.15%

Total Fund Fees - 0.15%

Net Fund Expenses - 0.15%

Net Separate Account Fees - 0.65% ( This includes the mortality and expense fees)

Total Net Variable Account Account Option Fees - 0.80%

The fees are not VERY HIGH compared to other life insurance companies for variable annuities for 457 (b) plans that I have seen.

However I know I should stay away from variable annunities. In my case though I don't have any other options through my city.

I have scheduled a meeting on July 18 with my city plan Administrator. I am going to try and convince her to bring In Vanguard or Fidelity to offer 457(b) plans to us so we can benefit from the low fees.

If it does not work out then I will most likely go with VALIC to take advantage of the tax deferred plan.

Also Tony suggested for me to open a Roth IRA. I have done research on it the past couple of days. I want to open one now as it looks like a great option to even further diversity my portfolio.

However who should I go through for the Roth IRA? Everyone talks highly of Vanguard but there are so many options out there.

And if you could provide me some direction on where to invest in the Roth IRA, I would greatly appreciate it.

I am turning 31 and would not be able to withdraw until 28 more years. I would be depositing the max $5,500 every single year.

And my final question, after I pick my investment options within the Roth IRA, would I just leave it alone for the next 28 more years. Or do I need to monitor it and change around my investment options every few years or so?

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You could start with Vanguard Wellington, a 65% stock 35% bond allocation for your Roth. Call Vanguard and open up an account. With Wellington, you can leave it alone until you reach your 50s. But that is a long time. You need to keep an eye on your portfolio as it grows. You might need to rebalance, which is another topic, and learn not to panic when there is a crash, and to have a plan you understand.

 

I suggest that you read, The Bogleheads Guide to Investing. Find it here on Amazon. As Tony already suggested you have some learning to do, but you have a great start and this book will answer all of your questions.

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Wellingtion would be great choice. One of the few great performing managed funds. So would the Vanguard Star Fund (only 1,000 opening minimum) or a Target Date Fund that matches up with your retirement date or close to it and it is self managed. You could also do the same life strategy fund in your IRA as well as doing it with Valic. Eventually your Roth Life Strategy with Vanguard will ourperform because of lower fees than with Valic

 

Who should you go through for your Roth IRA? VANGUARD because of the low fees!!!!!! and honest management. Why pay more? Paying more gets you nothing more. It only gets you less.

 

Also yes. You need to leave it alone until retirement. Thats what it would be for. You will be rewarded if you keep adding to it and leave it alone for 25 years or so. If the fund at some point disappoints you, you can easily move it to a different Vanguard fund BUT don't go chasing performance because its a game you won't win.

 

You are asking all the right questions at your age. Keep doing what you are doing and don't be afraid to ask questions AND to pursue better choices.

 

 

Tony

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Fireman44, you're getting great advice. I agree with Tony, and I suggest you invest annually in a IRA for both you and your wife. Remember your wife doesn't have to be employed, she can contribute based on your salary. Either a Roth or a traditional would be OK. You can do some of both, and change which to use later when you learn about the pros and cons of each. I don't think you can go wrong with a Roth IRA at this stage of your career.

 

If you can confirm that the VALIC 457b has a total fee of 0.80% using the LSMG, I think it would be worth contributing to since it's your best deferred compensation choice.

 

If you can contribute 11k in IRAs and 18k in the 457b, and are able to contribute more to your retirement, then I think it comes down to either the SACT or using a taxable account at Vanguard. I think I would vote for Vanguard.

 

I think I misstated the NJ policy on tax deductibility in my post above. I should have said that deferred contributions are not deferred from NJ state income tax, but are deferred from federal income tax. Perhaps NJ firefighters are exempted from this?

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