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LibraryLady

Metlife- Could This Be Possible?

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I gave a presentation today about a potential new 403b provider, which went well. I spoke to someone afterward who had just met with a Metlife representative and asked her about fees. She of course could not answer the question of what the fees were, but could remember the surrender fee. My fellow teacher said there was a 6 year rolling surrender fee and basically didn't think she could get out of her plan with paying it until she hit 59 1/2. That does not seem possible to me. I did tell her to go back and look at her contract, but was wondering if anyone had experience with this?

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My fellow teacher said there was a 6 year rolling surrender fee and basically didn't think she could get out of her plan with paying it until she hit 59 1/2. That does not seem possible to me. I did tell her to go back and look at her contract, but was wondering if anyone had experience with this?

 

Fortunately I have no direct experience with rolling surrender fees! A 6 year rolling surrender fee means that what she contributed last year would have a fee of 6%, what she contributed in 2015 would have a fee of 5%, etc., and what she contributed 7 years ago would have no surrender fee. These fees in total would apply if she transferred her account to another provider. If the teacher has just started contributing to the MetLife annuity, the surrender fee wouldn't amount to that much. She absolutely has the right to change providers.

 

59.5 is the age at which she can take distributions from the 403b without an IRS mandated 10% penalty for early withdrawal. Actually if the 403b contributor is separated from their employer (the sponsor of the plan), they can take penalty free distributions at age 55.

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I believe she has contributed for quite some time, well over 10 years. Does this 6 year stuff just keep on recycling until she leaves or hits 59 1/2? I mentioned the 59 1/2 because I thought usually the surrender fee ends at that time no matter what. At least that's what my contract says, although I've had my 403b for over 12 years as well and am 60.

**i just read more online before I posted. She must have the type of annuity where the clock starts again with the premium payment. Seems criminal to me. The balance is not nominal; she's been contributing for years. She would have to stop paying now and wait till 6 years is up before getting rid of it.

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I think what "rolling" means is that the last 6 years, starting at the current year will each have a fee. Usually the fee decreases for the older contributions, so if it's 6% for the latest year's contributions, and 1% for the contribution 6 years ago, the overall fee works out to maybe 3 or 4%. Contributions 7 years ago would have no fee. The problem with waiting out the 6 years is that the yearly fees (often 2 to 3%!) will eat up the principal and add up to more than the surrender fee!

These annuity based 403b plans are contributed to every pay period, so every year the 6 year period (some of them have 10 year rolling surrender fees!??) is moved up. It would be worth it for her to get out because she is paying those high annual fees of probably at least 2% and they apply to the total of her balance.

Example: If the balance is $300,000 and the surrender fee ends up at 3.5%, the fee would be $10,500. However if the annual fee is 2%, the annual fee would be $6000. The annual fee at Aspire using Vanguard index funds would be about 0.35% or $1,050. That's an annual difference of about $5,000. After about 2 years at Aspire, she would be ahead.

I'm not aware of the surrender fee being dropped at age 59.5. It certainly should be the law. She should check her plan.

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MetLife will figure out the surrender fee--should be easy for their computer. They can cough up the annual fee total if they want to. It might take some perseverance to get it out of them. Every annuity 403b holder should find out both those numbers.

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I feel your MetLife pain. It sounds like you may be talking about the MetLife Financial Freedom Select Plan. My surrender charges last a total of 12 years! Not a typo . . . 12 years! I have been moving 10% penalty free every March (my contract renewal date) for the last two years into Vanguard (now an approved vendor in my district). However, this April I plan to move the rest of my money over to Vanguard and take a 5% surrender change. My surrender charge is 5% because I am in my seventh year of my contract. Luckily, I have not contributed to this Financial Freedom Select Plan since I rolled my money over to it seven years ago. Still, I will be hit with over $3000 in a surrender charge! I am doing this because I currently pay 1.15% to MetLife for the privilege to have them invest my money. Then I pay an additional 1.03% for the T. Rowe Price Mid-Cap Portfolio and 0.75% for the T. Rowe Price Small Cap Portfolio. I hate the fees, but I hate the lack of transparency even more. If not for this site and the book, Teach and Retire Rich I would still be clueless. Better late than never.

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Two different people have asked me about MetLife since I gave that talk at school. I am not an expert by any stretch, but feel comfortable reading the contract. There is nothing that is clear, and what is there appears like it should be illegal. Never thought I'd say this, but it makes me happy that I picked AXA. Some of these plans should come with a warning label. This plan is hazardous to your financial health.

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LibraryLady beware of AXA. From talking to teachers in my district, AXA may be worse than MetLife. If you are in the AXA Equivest Variable Annuity it has a 12 year surrender period. The only good news is it is not on a rolling basis.However, their fees (in my experience) are worse than MetLife. Look out for the several layers of fees. My friend was paying about 2.5% - 3.0% in total fees with AXA. Do you know if your money is in the Equivest program? Do you know what funds you are in?

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Sorry, didn't mean to mislead anyone. AXA is terrible which is why I've been working to get Aspire added to our horrible choices. I fully intend to get out as soon as Aspire is added. I've had my account longer than 12 years so I will not be paying surrender fees, although I think there is a $65 closing fee. I just think MetLife is even worse as far as transparency and getting answers when you ask a direct question of the "adviser". A friend ended up by calling MetLife directly because she couldn't get her question answered by the local person. I am paying 2.22%- 2.51% currently at AXA. Hoping this will be before the end of the month.

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