Author Topic: Variable Annuities -.-  (Read 4067 times)

ApplePI

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Variable Annuities -.-
« on: June 12, 2015, 11:51:59 AM »
I started a thread a couple weeks back about the vendors that I can use to invest with in my school district's 403b plan. I took the consensus advice and called/pestered each company to find out exactly what they offer, and not a single one allows me to invest in funds directly. Rather, they all require me to set up a variable annuity which has an additional expense - as high as 5% in some cases. From what I have read, variable annuities are a lousy investment vehicle. If they are my only option, though, should I just pick one and roll with it? Or should I go taxable?

BarkyardBQ

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Re: Variable Annuities -.-
« Reply #1 on: June 12, 2015, 12:00:58 PM »
Does your school district offer a 457b?

ApplePI

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Re: Variable Annuities -.-
« Reply #2 on: June 12, 2015, 12:04:50 PM »
Unfortunately, no.


MDM

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Re: Variable Annuities -.-
« Reply #4 on: June 12, 2015, 01:12:30 PM »
If they are my only option, though, should I just pick one and roll with it? Or should I go taxable?
I'm with zdrave on this one - fight back.  Do you have a union to support you (assuming the union leadership is not getting paid off by the annuity vendors) in discussions with the school administration (because the admin folks might be getting paid off by the annuity vendors)?

A further problem with variable annuities (beyond the high annual fees) is they often limit your upside (e.g., with "participation rates", "caps", etc.).

From what you have posted, staying with taxable seems best.  You can use the "401k vs Taxable" tab on the spreadsheet downloadable from the case study sticky to try your own "what-if?"s.

Another Reader

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Re: Variable Annuities -.-
« Reply #5 on: June 12, 2015, 01:59:47 PM »
Do you have a pension plan?  Are you paying into Social Security?  You are backed into a corner if you don't have a good pension plan and Social Security.  In your shoes, I would start looking at other school districts with better retirement provisions if you don't have good alternatives to the 403b plan.  At the same time, I would start lobbying HR, the district BoE, and your teachers' union to improve the choices.  And fully fund an IRA.

ApplePI

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Re: Variable Annuities -.-
« Reply #6 on: June 12, 2015, 03:51:24 PM »
I do plan to fully fund my Roth, and there is a pension. However, that pension may not be around in 35 years (I'm in IL) and I don't know if I really want to work that long.

No social security for me, either. I'll mess with that calculator to see how these fees stack up against a taxable.

Another Reader

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Re: Variable Annuities -.-
« Reply #7 on: June 12, 2015, 04:10:46 PM »
How many years have you been with the district?  Is there anything special about staying with this school/district?  If not, in your shoes, I would seriously consider moving on to a better district.  Your pension is at risk and you do not have good alternative tax deferred or after tax options.  You will have no Social Security if you stay.

For an example of a teacher who takes advantage of all the various retirement account options in multiple districts and teaching positions, you might take a look at Ed Mills' blog:

http://www.millionaireeducator.com/

He picks his teaching jobs with strong consideration of the 457b plan offered and the other plans available. 

ApplePI

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Re: Variable Annuities -.-
« Reply #8 on: June 12, 2015, 04:16:38 PM »
I'm a new hire, and this is my first year teaching. I won't be able to leave for a "better" district (this was my first choice school when I was interviewing) for at least a couple of years. Truly, I was hoping there would be a way to make things work out, as I really set this up to work: moved close enough to bike to work and a grocery store, opened an IRA, setting up side hustles, etc.

I'll keep asking around at HR, etc and see what others recommend.

Another Reader

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Re: Variable Annuities -.-
« Reply #9 on: June 12, 2015, 05:45:46 PM »
Depending on how you set up your side hustles, there are ways to set money aside from them, including SEP IRA's and solo 401(k)'s.  Set up correctly, you can put as much or in some cases more away than you could put in the 403(b) plan.  However, the money that is invested must be no more than the net income generated by the business. 

jsternitzky

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Re: Variable Annuities -.-
« Reply #10 on: June 12, 2015, 10:08:34 PM »
I started a thread a couple weeks back about the vendors that I can use to invest with in my school district's 403b plan. I took the consensus advice and called/pestered each company to find out exactly what they offer, and not a single one allows me to invest in funds directly. Rather, they all require me to set up a variable annuity which has an additional expense - as high as 5% in some cases. From what I have read, variable annuities are a lousy investment vehicle. If they are my only option, though, should I just pick one and roll with it? Or should I go taxable?

Let me guess TIAA-CREF?
My company uses them and there was a ton of annuities, a bunch of target retirement funds, a few terrible guaranteed funds and 1 lowly Equity.

Luckily they mirror the Russell 1000 so it is fairly decent. However, this fun is 10X the fees my Vanguard fund in my IRA is charging.

The funny thing is that TIAA offers more but for some reason my company only has 1 available.

Why don't more companies just go with a company like Vanguard and have them offer every fund under the sun?


ApplePI

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Re: Variable Annuities -.-
« Reply #11 on: June 13, 2015, 09:16:03 AM »
I asked the "why" question a few times, and some older staff members mentioned that there used to be more/better choices, but IL changed some rules (laws?) and most companies actually dropped us. We didn't drop them. Seems weird, but it is what it is. I'll keep digging.