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MoeMoney

Get Out Of Axa Or Keep Some In Its 3% Guaranteed Interest For The Futu

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Hi,

Some of my 403b is with AXA - 13 years this month. I have no surrender fee (that I'm aware of). We just added Aspire in a mix of lousy options so I am now eager to exchange my Ameriprise and AXA monies out and into Aspire.

I've thought about keeping the 3% guaranteed interest active in case it's my safest, conservative option down the road when I want more conservative investments.

I don't think it makes much sense since it's AXA and I'm not keen on keeping money with them but is there a valid reason why I might want to?

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Hi MoeMoney,

How many years ago was your last contribution to the "3% guaranteed interest" fund? I'm wondering if you are in an annuity based 403b where the surrender fee time period starts with each contribution? Or, has it been 13 yrs since your last contribution? You should ask the AXA rep about possible surrender fees.

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Depends on how big is your overall allocation to this 3% guaranteed interest. If you are under 50 years old, you should have roughly 40% in fixed accounts. Again, it depends on other factors, such as when you need the money for retirement, what is your total financial situation, your willingness and need to take risks.

 

For example, at my age of 69, I have 70% in international bonds, iBonds, Vanguard Total Bond market and my newest allocation TIAA's traditional annuity also paying 3.0% guaranteed with no surrender fees and protection of principal. I have had 70% fixed for over a decade mainly because I was not willing nor needed to take risks. I was lucky as the bond market was excellent during much of the last decade, and it saved my butt from HUGE losses during 2008. I was and still am lucky the way my portfolio has grown despite having 70% in bonds, and only 30% in equities while getting through 2008 relatively unscathed.

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Yes, you were lucky with the high yield of the bonds all this time Steve.

The bulk of my money is in Vanguard's total stock market, some in Vanguard's total bond market and the rest here. No surrender fee at all, know36, as my contract was Date of inception vs. date of each contribution.

I actually decided to free myself of AXA despite the 3% guarantee rate simply bc it's AXA. Simple enough to understand around here. And I got my paperwork in yesterday, before what might be an onslaught given Tara's article.

 

My district is going to look good now because they were 'smart enough' to add a lower cost option (Aspire) this summer. Good thing "they" are so smart.

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Hi All,

 

I have a similar question regarding the Guaranteed Interest Option in the Equivest Variable Annuity at AXA. I've read about the high fees and other expenses (through this site and other books) since the late 90s. I got out of a TSA at AXA myself almost 20 years ago. The articles in the NYT have been great in giving this more national attention.I've been sending these articles to many friends stuck in high cost variable annuities in their 403bs. The mortality and expense fee as well as all the others make these terrible options in my opinion.

 

I do have a question from a friend who is invested in the guaranteed interest option in an AXA Equivest plan. He mentioned he is currently earning 3% and is well past any surrender fees. Is he paying any related insurance fees or expenses with this investment or is he earning the full 3%? He does have access to a 403b (7) with Vanguard; however, he's concerned that Vanguard's Money Market accounts earn almost nothing while he's earning 3%. If someone is looking for a guaranteed return and doesn't have the need or desire to take risk is this such a bad option for the fixed portion of someone's investment portfolio? Is there anything that I'm missing (aside from the fact that AXA has ridiculously high fees for their stock/bond sub accounts)?

 

Thank you for taking the time to respond. Keep up the good work.

 

John

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Hi Yankee Fan

 

My understanding is most funds state their returns with the expenses included as part of the equation. So I would think that 3% would reflect expenses subtracted but you might want to have your friend read the prospectus to make sure. Thats how he would get the corrrect answer. He probably gets a annual report-prospectus at least once a year with updated information. Make sure he is not paying more fees than he thinks he is!! Insurance companies are notorious for hiding some or all their fees. Go read the prospectus!!

 

There is nothing wrong for getting that guaranteed 3%, but unless your friend is already wealthy why would he put all his retirement money in such a low yielding investment? Of course I don't know his situation .If he has Vanguard he should take advantage of it for a portion of his savings perhaps in stock and bond funds. If the money market is the only place he is saving for retirement he won't see the growth he needs to cross the finish line. Being too conservative is just as dangerous as investing too aggressively.

 

Tony

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I don't think you can assume that the full guaranteed interest rate is the ultimate rate.

 

In the Calstrs Pension 2 plan, run by Voya, their stable value fund guarantees a certain rate, but they then deduct a .25% fee for all assets in the plan. So if the guaranteed rate is 3%, one actually receives 2.75% And Calstrs Pension 2 is generally a lower-fee operation than AXA.

 

If after investigation the rate seems reasonable for the "ballast" part of your portfolio, it seems like a decent idea to keep some money there--as you know, Vanguard and retail funds just don't offer an equivalent guaranteed rate. For comparison, 5-year CDs are currently paying about 2%.

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Yankee Fan and Whyme

 

I stand corrected if that is the standard procedure in all cases. I've never invested in a stable value fund so I was assuming . Still Yankee Fan let us know what you find out how your particular situation works .

 

 

Tony

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Tony, I don't know what standard procedure is with these insurance products. Just relating my experience, with the suggestion that it's worth checking to see if there are other fees in Yankee Fan's case, since in at least the one case I know of there is also a "wrap" fee.

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