403b rollover fixed annuity question

[fidreamer]

Hi, smart people.  So I have left my job and am starting a 403b rollover.  It is with Great American Insurance Group...yuck.   Most ($355,000) is in a variable annuity with something like 1.5% fees which I am planning on putting in my Vanguard traditional ira.  The other portion is in a fixed annuity ($26,000) that makes about 3% and seems to have no fees according to the rep.  I always thought of this fixed annuity as a bond account.  Can someone advise me on this annuity piece.  Not sure if I should roll this one over or leave it alone.   Feel like I must be missing something here bc I don't really understand annuities.

[MDM]

...I don't really understand annuities.

That's an excellent reason to get out of them.

Before you do, check to see if there is a significant surrender charge and if so, for how many more years.  When you do leave the annuities, consider a Three-fund portfolio or Target date fund.

[fidreamer]

Good point.  Seems as though surrender value brings it from $26, 300 to $24,800 until 7 years go by.

[theolympians]

I believe an annuity is simply a contract with an insurance company. You loan them your money and they provide you with a variable or fixed interest or a set period of time. I've been told they have high fees, and (as you notice) a number of constraints.

To all: Is the above correct? I don't have an annuity, but would like to know if my belief is accurate.

[MDM]

...annuity...simply....

Two words that, in the absence of the word "not", don't belong in the same sentence.  With one possible exception: a Single Premium Immediate Annuity.  But that is not the kind sold by the vast majority of annuity sales people.

One of the hallmarks of annuities sold by annuity sales people (aka financial advisors, but the sales term is usually more accurate) is the extreme complexity of the contract that governs the annuity.  I'll let you guess, between the insurance company and the purchaser, who that complexity favors.

[theolympians]

MDM, what exactly are you buying when you purchase an annuity?  I am not being facetious. As you mentioned they are "complex"; which is a polite term.

[ILikeDividends]

I believe an annuity is simply a contract with an insurance company. You loan them your money and they provide you with a variable or fixed interest or a set period of time. I've been told they have high fees, and (as you notice) a number of constraints.

To all: Is the above correct? I don't have an annuity, but would like to know if my belief is accurate.

You do not loan them money.  Once you sign the contract, "your money" belongs to them; it is no longer "your money."  Early liquidation of that contract is then subject to the terms and conditions of that contract.

An annuity is not like owning equity.  With an annuity, all you "own" is the terms of the contract.  If you don't understand the terms of that contract, continued "ownership" is a dubious proposition, at best.

If you want to loan someone money, buy a bond.  Those are a whole lot easier to understand.

[MDM]

MDM, what exactly are you buying when you purchase an annuity?  I am not being facetious. As you mentioned they are "complex"; which is a polite term.

What type of annuity?

Unfortunately, I'm not being facetious either.  See Category:Annuities - Bogleheads for some varieties.

[facepalm]

Do you have a choice as to where you send your rollover? Is your employer telling you you have to invest with GALIC?

I had a 403 annuity with GALIC. Paid very little, could not wait to turn 59.5 so I could roll it over to my Schwab IRA.

[theolympians]

I believe an annuity is simply a contract with an insurance company. You loan them your money and they provide you with a variable or fixed interest or a set period of time. I've been told they have high fees, and (as you notice) a number of constraints.

To all: Is the above correct? I don't have an annuity, but would like to know if my belief is accurate.

You do not loan them money.  Once you sign the contract, "your money" belongs to them; it is no longer "your money."  Early liquidation of that contract is then subject to the terms and conditions of that contract.

An annuity is not like owning equity.  With an annuity, all you "own" is the terms of the contract.  If you don't understand the terms of that contract, continued "ownership" is a dubious proposition, at best.

If you want to loan someone money, buy a bond.  Those are a whole lot easier to understand.

Thanks. Like I typed, I don't really understand them. Hence, I do not own one.

[fidreamer]

Do you have a choice as to where you send your rollover? Is your employer telling you you have to invest with GALIC?

I had a 403 annuity with GALIC. Paid very little, could not wait to turn 59.5 so I could roll it over to my Schwab IRA.

I hear you.  Now that I have resigned planning on rolling over to Vanguard account.