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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76235  
Subject: Re: Questions about 403(b)7 Date: 4/21/1998 2:37 PM
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Greetings, CodyZen, and welcome.

<<I find the discussion about variable annuities in a 403(b) plan to be a little confusing. I'm not certain that the "varible annuity" that an individual can buy through an insurance company is the same as what is offered in at least my 403(b). My company puts our 403(b) in a plan with TIAA-CREF. They define an annuity as: "An annuity is a 'sum of money payable yearly or at other regular intervals.' Annuities are generally used to accumulate funds for retirement or other long-range goals and/or to receive periodic income payments for life or for a set period of time." In this case there is no provision for mortality. They further define Variable Annuity as "An annuity, the value of which fluctuates based on the market performance of an underlying securities portfolio. Unlike Fixed Annuities, there is no guarantee of principal or rate of return."

Again there is no provision for mortality. I also thought I read somewhere that a 403(b) must be invested in a variable annuity, but I don't recall where and am probably wrong.

TIAA-CREF also benchmarks against typical market indexes. I won't claim stellar performance, but they are close to market averages for mutual funds. Year to date for their major fund is 15.6%+ And their administrative expenses seem pretty low about .3 to .4 percent for most funds.

Also, while they are set up to pay out in an annuity stream, I also have the option to roll the entire amount over into an IRA or another 403(b) if I leave the company or when I retire. I'm not convinced that this is as bad a deal as other comments imply. I also don't know if this is typical for a 403(b) plan, although they are one of the largest providers in the country. >>

I confess I know little about TIAA-CREF's variable annuities, but I do respect the organization. It is a large 403b provider, but still many 403b plans do not use their offerings. In fact, most of the posts I've seen on 403b annuities in this folder indicate they are insurance company products furnished by other companies. That's the kind of product I was referring to in my previous post. TIAA-CREF's may be different, but as I said I really don't know.

BTW, a 403b may be invested in annuities OR mutual funds. From what I understand about TIAA-CREF's annuity, you cannot get a lump sum at retirement. Instead, I understand that to phase out the annuity at retirement and transfer the money to an IRA you must do so over a ten-year period of time. That's not quite as easy as it would be if the 403b was invested in mutual funds instead.

Regards…..Pixy
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