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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 77227  
Subject: Re: Tax Sheltered Annuity-Bad idea? Date: 8/6/2006 10:20 AM
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First let's straigten a couple of things out.

The "mutual funds" the nice man selected are actually sub-accounts of the variable annuity. They have signifigantly higher internal fees that you never see; it just comes from your return. Plus you have horrific surrender charges.

The industry uses tax shelered annuity has the hook. The tax shelter is the 403b plan while the annuity is the vehicle inside the plan. What you doing is akin to taking a shower while wearing a raincoat. You are paying extra for the TSA and getting no extra benefit. Plus the marketing gimmick -tax shelered annuities- is very misleading, you actually have a tax deferral. Calling it a shelter makes it more palatable.

Most teachers are in the lower tax brackets so there is little benefit from salary deferral. So fully fund a Roth.

Then look at saving in a taxable account. Currently capital gains are more favorable than ordinary income.

Lobby your HR and administration. You can have mutual funds instead of annuities, the salespeople don't want to do that because the commissions are less.

Finally, bookmark www.403bwise.com It is an essential website for teachers.

Most school systems kick in extra money in a pension plan not 403b plans because there is no incentive for them to do that. Make sure that you are actually getting a match to your contribution.

Finally, annuity salesmen are sleazebags. Don't mean to sugarcoat it.

buzman
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