403b and 457 With Same Annuity Company?
Annegriet
3 years ago
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Annegriet
3 years agolast modified: 3 years agoRelated Discussions
retirement surrender fees...wow!! and HELP!
Comments (9)behaviorK - funny you mention a teacher getting into an annuity as part of her retirement planning. Just last week on Suze Orman, a teacher in CA called about this very thing. She was told the 403b was her only option and the caller didn't feel right about it. Suze told her not to contribute to it. At what age does this annuity mature? In the caller's case, it was at 85 YO, which is ridiculous. You may want to get your GF to suck up the 10% or just leave it and stop contributing to that 403b altogether. In the caller's case, she had not started contributing and Suze advised her not to. If she sucks the 10%, you should help her try to find a bit more aggressive fund in which to replace it and try to earn back some of the funds she lost in the surrender. Depending on her age, she can still invest in ROTH, traditional IRA's and have a nice nestegg. That is what Suze recco'd to the caller - to divert the money she would have allocated to this annuity to much more reasonable retirement savings. Whatever you do, she needs to stop the contributions to the annuity pronto and find another avenue - be it Vanguard or whatever else. I think the episode ran last Saturday, which means it repeats tonight with the new episode. If you have TIVO, record all SUze Orman shows and see if the ep with the specific question aired again. Like you, I"m surprised that the employer has such a crappy retirement plan....See MoreIs a pension easy to equal on your own?
Comments (17)Usually the owner of the money gives a pot of money now, or makes regular payments over a period of time, to usually an insurance company, in exchange for a benefit that the insurance company offers. The insurance company agrees to begin paying a specified amount to that person, beginning at a certain date and, often, continuing for the rest of the person's life. Or, at a lower rate of regular payout, to include a surviving spouse. However ... some people found that the original owner of the money often died within a few months of beginning to receive the annuity ... and that was the end of the contract: the full amount paid was kept by the insurance company (except for the small amounts paid out). One financial advisor that I knew had a client over 80, with no dependents, that considered buying an annuity (i.e. was in the process of being sold an annuity by an agent). He, cancelling another appointment, travelled some distance to meet with the two, and when he asked how much of a benefit there would be if the lady died in a couple of months, was told that there was no such provision in the proposed agreement. Many people who were much younger than that lady, when considering a proposed contract, didn't like that idea, so there's an option available for the original purchaser to have a provision in the contract where the payout period will be for his/her life but, should s/he not live long after the payout begins, the annuity will continue (at a reduced rate) for a 10, or 15 year, or other length, period. The rates that insurance companies offer regarding annuity payout lebvels usually bear some connection with current interest rates. When rates are high, often the rates of payout offered by annuities are higher than average, but usually not comparable. When rates are low, as they have been lately, payout rates offered are usually low. The reason being that the insurance company has guaranteed to make payouts at predetermined levels, but don't have certainty as to how much they can earn on the invested assets in the meantime. The insurance company doesn't give a guarantee to make a level of payout that is going to hurt them in the end. In the case of life insurance, the owner of the policy bets that s/he's going to die prematurely, when some non-employable dependents require an income for them to live on for a number of years, but leaving no one to provide it. The insurance company bets that the buyer of the life insurance is going to live to an advanced age, paying premiums throughout. The insurance companies are the ones with the actuaries. In the case of an annuity, the buyer is betting that s/he is going to live for a long time ... collecting that annuity payment regularly through to, say, 104. And the insurance company bet that s/he's going to die before they've paid out a bucket of money in total to that person. And if they're covering a spouse, as well, or have given a guarantee that they'll continue paying for, say 10 years, even if the owner dies a month after payout begins ... the amounts of the regular payout the the company is willing to offer is lower. As their risk is greater. I confess to a bias against insurance companies' practices, largely because they marketed whole life insurance policies for ages, telling ofthe great value in having some value build up in the policy over the years. But, in order to collect that "extra value" ... ... the owner of the policy pretty well had to arrange to be alive and dead at the same time. For many, who want to spend some time learning how money works, and are not going to get all bent out of shape if the value of theri assets drops for a while when there are corrections in the equity markets, I think that they can likely do better investing on their own, if they do it skilfully. For quite a long time, I said that no one cares as much about your money as you, so it's wise to learn how to manage it well. But in recent years I've changed the tune somewhat, to ... no one cares as much about your money as you ... except some folks that would like to shift some (most? all?) of it from your pocket ... ... into theirs. Your job is to keep that from happening ... unless you get good value in return. Enough for now. Good wishes for making themost effective coices, given your circumstances. ole joyful...See MoreDems Target Private Retirement Accounts
Comments (27)>>b-4 our new marxist regime takes over.Ummmmm. Last I checked it was the BUSH administration putting the government in the business of bank ownership? And it's the BUSH administration and the rest of the Republocrats handing over OUR tax $$$ to a bunch of their cronies like GM and Citibank whose firms are going to go bankrupt because of their poor foresight and inability to meet market demands while paying their CEO's billions? And lets see, it's the BUSH administration took a budget surplus in 2000 and turned it into a record-breaking deficit, while creating the biggest government and government debt in history, including an entire new cabinet-level beaurocracy (Dept of "Homeland Security") to suck billions of dollars towards creating an atmosphere of fear? Are you safer now than you were in 2000? Think again. And the NEXT guys are the "marxists" and crooks who will create big government and mishandle our tax dollars? What planet are you on? I'm just glad BUSHCO didn't get their hands on privatizing my Social Security. At least the money I'm losing in my 403b isn't my social security for the future, just my own damn money. Perhap I'll have something to live on in my old age, thanks to FDR. I hope that Obama can provide us with the "Next Deal" to get us out of the Great Depression II that Bush has pushed us into. World War I was just known as the "Great War" until World War II came along. Now we'll have the "Depression I" and the "Depression II" to tell our grandkids about....See More401K/annuities
Comments (26)Bill, In order to take advantge of IRS Rule 72(t), which does permit early, penalty-free withdrawals, you will be required to take regularly scheduled distributions from the 401K for at least 5 years. If you retire at 55, that would mean until you are 60. There are three permitted ways of determining how large each distribution must be, the specifics of which are too complicated to go into here. However, Bankrate.com does have a calculator which you can use to figure out how much you would receive annually using each of the three methods. Plugging in your numbers as best I could, I calculated that your minimum annual distribution would be about $32,000 and your maximum about $44,500. That corresponds to a minimum monthly income of about $2670 and a max of about $3790. Note that you need to input the "applicable Federal midterm rate," which is 2.44% for March, 2011. Obviously, it will probably be different during the month your plan is implemented, should you go that route. So any results you get using the calculator will be somewhat rough, but at least will get you in the ballpark. The biggest red flag that hovers over 72Ts is that these early distributions, especially if you take the maximums, may result in you depleting your account during your lifetime. If I were doing this, I'd stick with the minimums. If you have any intention of doing this, you MUST find a professional tax advisor who is very experienced in setting up these plans. It's very easy to screw things up and leave you stuck with paying big tax penalties. Here is a link that might be useful: 72(t) distribution rates...See MoreAnnegriet
3 years agolast modified: 3 years agojakkom
3 years agoElmer J Fudd
3 years agolast modified: 3 years agochisue
3 years agoElmer J Fudd
3 years ago
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