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GSCalifornia

Getting Out Of National Life Group/life Insurance Company Of Southwest

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I've been working for the same school district for 3 years now. Two years ago I received an email from the district indicating that a retirement planning seminar will be held at the district office so I decided to go. A rep from Teacher's Pension and Insurance Services went over the importance of saving for retirement early and reviewed the different types of annuities (fixed, indexed, variable). At the time, I knew I wanted to start saving for retirement early and I was under the impression that the rep was someone from the district who would provide me an objective overview of my retirement options (I know, very naive of me). I met with the rep one-on-one and signed up for an indexed annuity through National Life Group/Life Insurance Company of Southwest. He assured me that I was doing the right thing by getting into something early and that it didn't matter so much what it was, as long as I started saving (big mistake). I signed my life away and as I am now learning more about these pesky insurance plans, I really regret what I did. I currently have $4,200 in the National Life Group indexed annuity (Secure Plus Elite 5). I want to get out of that plan but there is a 10% surrender fee. I'm 31 years old and have many years of saving ahead of me. I am thinking that paying $420 now to get out of this plan will not be too bad in the long run? Maybe I could make that back over time with another company with higher returns? National Life Group's website is terrible and super confusing... I cannot even tell how much my money has appreciated so far (I know it is not much though). My district offers several options for 403b:

 

American Century Investments

American Fidelity Assurance Company

American Funds Ameriprise Financial, Inc.

AXA Equitable Life Insurance Company

CalSTRS Pension2

Fidelity Investments

Foresters Financial (formerly First Investors)

Franklin Templeton Bank and Trust

Great American Life Insurance Company (Annuity Investors)

GWN Securities

Horace Mann Life Insurance Company

Jackson National Life Insurance Company

Life Ins of SW / National Life Group

Lincoln Investment Planning

Lincoln National Life Insurance Company

Mass Mutual

MetLife Insurance Company

Midland National Life

North American Company for Life and Health

Oppenheimer Funds Distributor, Inc.

Pacific Life Insurance Company

Plan Member Services Corporation

RSG Securities

Security Benefit Group

The Legend Group/Adserv

USAA Life Insurance Company

VALIC

Vanguard

Voya – ReliaStar Life Insurance Company

Waddell & Reed, Inc.

 

I have heard wonderful things about Vanguard and would be interested in transferring my money there. Are there any other reputable companies from the above list that I should look into? What are your thoughts about paying the 10% surrender fee to transfer the money to another company? Should I let the money sit or transfer?

 

Thanks for your help!

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On 7/12/2017 at 2:24 PM, GSCalifornia said:

What are your thoughts about paying the 10% surrender fee to transfer the money to another company? Should I let the money sit or transfer?

 

To know if it is worth it to pay the surrender fees and move on, you have to know the surrender fee schedule, the annual fees you're currently paying, and the annual fees you'd be paying at your new vendor.

 

For example, here in OCPS (FL) AXA charges people roughly 1.75% per year and their surrender fee schedule is:

 

6% in first five years

5% in sixth year

4% in seventh year

3% in eighth year

2% in ninth year

1% in tenth year

 

Folks in OCPS (FL) have access to vendors that charge roughly 0.07% per year. In most cases I've seen, it is in peoples' best interest to pay the fees and move on. However, if your 10% fee goes to 0% next year then it is probably worth it to wait. I'd need more information to give my opinion.

 

On 7/12/2017 at 2:24 PM, GSCalifornia said:

Are there any other reputable companies from the above list that I should look into?

 

I'm not familiar with every vendor you've got but I can see there are some excellent choices.

 

If you want to build a 3 Fund Portfolio, you'll do great at Fidelity, Vanguard, or Security Benefit's NEA DirectInvest (where you can buy Vanguard funds). If you want a 1 fund portfolio then you’ll do great at Fidelity or Vanguard. I’d rank Security Benefit NEA DirectInvest as the clear #3 because they’re more exploítative than Vanguard and Fidelity.

 

I documented Security Benefit's NEA DirectInvest hereIf you decide you want Security Benefit's NEA DirectInvest, I documented every step to enroll here.

I documented Fidelity here

I documented Vanguard here.

Your variant of the plans may be slightly different since you're not in OCPS (FL), but I'm happy to answer any questions you may have. Good luck!

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GS

 

Get Out Now and pay that surrender fee and be done with it. You will never regret it!! Plus you've got access directly with Vanguard. What more could you want? As Ed mentioned you have among the garbage some good options but in my opinion if you have direct access to Vanguard than thats all you will need now and in the future.

 

I can't remember exactly but when I finally got rid of my annuity my surrender charge was in the 3-4 thousand dollar range. But, I soon realized the much lower cost I was paying plus better performance was the great equalizer and I was making so much more money with Vanguard that I never noticed the loss.

 

You are only 31 -you have only $420.00 to lose and everything to gain. Trust me.

 

Also, once you are in Vanguard start upping your contributions every year. You will be glad you did.

 

 

 

Tony

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The surrender fees are:

12% year 1

11% year 2

10% year 3

9% year 4

8% year 5

7% year 6

6% year 7

5% year 8 ....etc.

 

More info on plan here: http://www.glpagent.com/wp-content/forms/LSW%20-%20%20CA%20Only%20-%20SecurePlus%20Elite%205.pdf

 

From what I understand, there are not any fees (based on the info in the link above). I have no idea how the broker is paid, which makes me suspicious. Looking over my past statements, I do not see that my money has grown since I opened it in May, 2016. Seems like the account only has what I have put into it. The statements list a Bonus Accumulation Value but it seems as if I have to keep my money in the account for the 10+ years in order to receive that. I really do not understand indexed annuities.

 

Here is the explanation I found on the plan:

SecurePlus Elite 5 is a flexible premium indexed annuity. The SecurePlus Elite 5 features a Bonus Accumulation Value that is equal to 5% of the Accumulation Value in years 1-10 and transfers to the Accumulation Value on the sweep date following the 11th-15th policy anniversaries. SecurePlus Elite 5 sweeps on the 14th of each month.

 

Does this make sense to anyone??

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GS

 

Lets' cut to the chase.

I won't even make an attempt to explain what it all means. The point is you are in a product you don't understand and has not grown in a time when markets have been going up.The point is you need to get out of it immediately and heed the advice given to you above.

 

Any investment product that can't be explained to a fifth grader is too complex to own.

 

Initiating a transfer is an easy process (usually)and if you call vanguard they will help you get it done and explain the process. You will probably need to fill out forms for the company you are leaving, the new company ,and also possibly third party administrator forms if applicable. I think there are more fees than you may realize in your current product. If they are not easy to find or figure out, then again you are in a bad plan that lacks transparency and has no place in your life.

 

Good Luck

 

Tony

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I second Tony's advice.

You don't understand it because it was designed to be hopelessly complicated because if people understood it then they'd never invest in the first place. Surrender fees exist to discourage people from leaving once they begin to understand it.

From Jan 2014 to Jun 2017, the US stock market is up 39%. You shouldn't evaluate an investment based on historical returns but your returns are bad because the investment was structured to perform poorly.

I can see how this advice may be less than satisfying. You got into this situation because you made a decision without fully understanding it and now it is being suggested that you make a second decision without fully understanding it. If it would ease your mind then I encourage you to go through the exercise to fully understand the plan, but like Tony, I don't have the energy to guide you through it. I have full confidence you will reach the same conclusions Tony has.

If I were in your situation, I'd pay the surrender fees and know that I made the right choice.

I'm not sure what level of knowledge you already have but you may find the Investing 101 page I wrote helpful. This is what I said about annuities there:

Annuities are almost always extremely complicated and expensive products that enrich sales reps at the expense of investors. On the Bogleheads Forum, people frequently post about regretting the annuities that were sold to them and ask for guidance on how to get out of them. Unfortunately, annuities are prevalent in the education field and unless you consider yourself a financial expert then you should stick with mutual funds.


Make sure you fully understand the vendor you ultimately move to. I'm happy to answer any questions on that front.

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I also agree with Tony. Get out of one of the most hideous 403b companies NOW! I was 45 and I paid a whopping $6000 (out of $33,000 in two of those horrific fixed annuities) in surrender fees and never looked back. It disgraceful that you did not make any money in the last year. I made 5.9% in 2016 and 4.5% this year so far, and my portfolio is 70% bonds and 30% stocks.

 

By the way, I live in California too and Vanguard is very rare with any 403b k-12 district plans. It been a mystery to me why a few districts have Vanguard but the vast majority don't.

 

You are very lucky you found this forum. We have a lot of history fighting the annuity monopoly.

 

Steve

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Thank you all for your help! After many hours on the phone, I figured out the process of how to transfer the money and I set up an account with Vanguard (their customer service was much better than National Life Group and the third party administrator, Envoy). I am so grateful that I found this forum to confirm my skepticism of National Life Group and indexed annuities.

 

Ed, thank you for the Investing 101 link. I'm a rookie when it comes to investing so your overview was very helpful. Any advice on choosing to do 3 total market funds vs a single target retirement fund? Any further advice/resources for Vanguard funds to select?

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You've asked a question that has a long/nuanced answer. But, long story short, based on some assumptions I've made about you, I think you'd be happiest with a 1 Fund Portfolio. A Target Date fund is probably more suitable for you but a LifeStrategy fund might work too. Below is the longer story...


There are a few reasons a 3 Fund Portfolio may be preferable...

  1. If you have a taxable account, the IRS tax code may penalize you for using a 1 Fund Portfolio. Most people don't fall into this case but I can explain more if you do.
  2. If you want a finer grain of control than the 1 Fund Portfolio offers. Maybe you want a custom domestic/international stock split, maybe you want fine grain control of how bonds increase as you approach retirement, whatever. Most people are better off without this level of control, it may be just enough rope to hang yourself.
  3. Perhaps you have other retirement accounts (spouse's 401k?) with access to a limited set of funds and you need access to individual funds in your 403b/457b to "balance out" your overall portfolio.
But I prefer the 3 Fund Portfolio because it allows me to construct a portfolio with lower expenses. Here are the expense ratios for a 3 Fund Portfolio built using Vanguard's admiral shares:

  • 0.04% for Vanguard Total Stock Market Index (VTSAX)
  • 0.11% for Vanguard Total International Stock Index (VTIAX)
  • 0.05% for Vanguard Total Bond Market Index (VBTLX)
Here are the expense ratios for a couple of Vanguard's 1 Fund Portfolios:

  • 0.16% for Vanguard Target Retirement 2060 (VTTSX)
  • 0.15% for Vanguard LifeStrategy Growth (VASGX)
Unfortunately, Vanguard does not offer admiral shares in their 403b/457b accounts. Maybe that'll change someday. Here are the expense ratios for a 3 Fund Portfolio built using Vanguard's investor shares:

  • 0.15% for Vanguard Total Stock Market Index (VTSMX)
  • 0.18% for Vanguard Total International Stock Index (VGTSX)
  • 0.15% for Vanguard Total Bond Market Index (VBMFX)
As you can see the investor shares cost roughly the same as Vanguard's all-in-one funds. So why not take advantage of the convenience (most notably the fact that you don't have the chore of re-balancing) offered from a 1 Fund Portfolio? Plus Vanguard charges you $15/year for every fund you own in a 403b/457b...so by owning just 1 fund you save an extra $30/year.


Had you chosen Security Benefit's NEA Direct Invest, you would have had access to Vanguard's admiral shares. Had you chosen Fidelity, you would have had access to their super cheap 3 Fund Portfolio. In those cases, depending on other factors personal to your circumstances, I may have suggested the 3 Fund Portfolio because the lower expenses may have allowed you to keep an extra 4% of your real profits over a 30 year period.


When it comes to selecting which 1 fund is best for you, it all comes down to bonds. If you use a Target Date Fund you'll remain stock heavy for much of your career and as you get close to retirement the fund will automatically decrease your allocation to stocks. I love this approach for most people because it requires nothing of them and guarantees their portfolio is fairly stable when they approach/reach retirement. However, the heavy allocation to stocks may not match up with each person's risk tolerance and the last thing you want is to sell out of a fund during a crash because you weren't prepared to lose that much money.


If you use a LifeStrategy fund, you'll pick the fund that corresponds with the percentage of bonds you'd like to hold and that fund will never change the allocation. There are 4 funds, bonds increment by 20% and range from 20-80%. It becomes your job to exchange the fund for a more conservative variant later in life when you decide your portfolio needs more stability (i.e. as you approach retirement).


...FYI, Vanguard is the only company I've spoken to that gave me sound advice. Perhaps they aren't the only good guys out there but I've spoken to more than my fair share of vendors. You should always verify everything yourself but you should feel fairly comfortable that they can be trusted to act in your best interest. Also I like the idea of voting with my dollars and given that they're the only reason index funds exist...I support them any time I have the chance.

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GS

 

If you do the three total market funds you will need to keep a closer look on it so you keep each within the percentages you want. For instance, if you decide 60% Total Stock, 30% Total International 10% Bond, You will have to rebalance the funds from time to time so they stay within that parameter as one asset class may grow more than another. So after a year your 60/30/10% might end up say 50/40/10%. You will want to sell some shares to return to your original allocation. This would only need to be done once a year or so. As you get older you will need to change your allocation yourself . You have more control here.

 

A Vanguard target fund is pretty much made up of the same index funds, but you pick the target fund closest to your anticipated retirement date, and the fund is managed for you in terms of proper allocation. The rebalancing /changesis done for you internally and gets more conservative the closer you get to retirement. If you are nervous about how to manage your accounts, this is a fantastic option. In fact I really think it would be a good choice for you. You will never have to deal with a salesman/advisor again. I don't think Ed likes Target Funds because someone else is deciding your allocations for you. Still I would take a look at it. I know several folks who like the hands-off approach.

 

I would visit Vanguard's website. Everything is easy to understand and NO Smoke and Mirrors!! Each fund tells you its cost and what it invest in. Its so simple as it should be.

 

 

Also you can trust the info you get from Ed, Steve , and others here 100%. Some advice may vary but its all good,

 

Please keep us informed of how your journey goes.

 

Tony

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I don't think Ed likes Target Funds because someone else is deciding your allocations for you.

 

GS, it is true that I prefer a slightly different asset allocation, but Vanguard's Target Date Funds are every bit as "right" as my personal preferences. I would feel completely comfortable in Vanguard's Target Date Funds...in fact, my wife owns the 2060 fund. Don't let my personal preference influence you...if I weren't a tinkerer trying to squeeze out every last penny of profit then I'd be invested 100% in the target date fund.

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I am sure I speak for others as well as myself. We all are glad to help. Let us know how things are going down the road with your transfer. Please tell others about this site.

 

Tony

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Good news, according to Tony's thread, you'll soon be able to implement a three fund portfolio with Admiral shares if you so choose.

 

I'm glad you found this information helpful. I implore you, tell every last coworker about how exploìtative so many of these vendors are, ask your administrators to block the bad vendors from campus, and bonus points if you can convince your district to drop the bad actors altogether!

 

...the only reason this nonsense continues is because nobody complains.

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Good news, according to Tony's thread, you'll soon be able to implement a three fund portfolio with Admiral shares if you so choose.

 

I saw Tony's post and I was given similar information when I was on the phone with a Vanguard rep the other day. He said that Vanguard may be making some changes soon and offering Roth 403b, Admiral Shares, and possibly changing the $15 per fund fee to $20 for multiple funds (if I understood what he said correctly). Sounds like some good changes are in the works.

 

 

 

I implore you, tell every last coworker about how exploìtative so many of these vendors are, ask your administrators to block the bad vendors from campus, and bonus points if you can convince your district to drop the bad actors altogether!

 

 

When school starts up next month, I am definitely going to be spreading the word. I plan to direct people to this website. It's disgraceful that these annuity salespeople are allowed to market to us using district email.

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