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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75335  
Subject: Re: Tax Sheltered Annuity-Bad idea? Date: 8/6/2006 3:12 PM
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Great, another district that's incentivizing you to invest in something that they almost certainly get a 'kick back' from. Although the nice term for that would probably be discount.

The question is, is the tax sheltered annuity costing you more or less than $200/year.


You need to watch the returns of your investment and compare it to appropriate indexes. I'm going to make some quick assumptions which you should not take to be absolute, but you should figure out for your own situation.

I'm going to assume a 1-1.5% M&E fee, a 1.5% expense ratio, and a 5% load on $1500 of contributions per year.

With $8200 in the account, this would cost you $80-$120 per year in M&E fees. Lets say that expense ratio is 1% higher than you could get elsewhere, so that's another $80 or so. And youre paying a 5% load on $1500 contributions, or $75.

So that would be a total of approximately $235 to $275 per year in fees that's taken out of your retire. And we haven't even begun to consider surrender fees.



And as the account grows, these numbers will only grow proportionately. Does this apply exactly to you? I can't say, but you can certainly begin to figure out. In that case, the 'match' is certainly not worth what the TSA is taking from you.



There's *also* the question of what you're invested in. If recently your account only declined $40, you're probably in something far too safe that will never produce much growth for you. Find out what funds you're in, pronto.



Oh a side note, $8200 in 5 years is just not good enough, man. You will never provide yourself any significant retirement security at this rate. I know you're just starting out, and I know teacher's salaries are not the greatest, but you need to determine a plan to begin raising it. If you get a 3 or 4% raise, increase your retirement account contributions 2-3%. You will never miss the money and it will go a long way towards securing your future. You may alternately decide to open a Roth IRA with your raise.

If you do nothing else with this thread, figure out how to get serious about retirement savings. I understand you have a pension as well, so you may not need to save at the rate of others, but you should do the best you can. Saving in high cost investments is still better than not saving enough.
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