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Author: DW525 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 9935  
Subject: My 403(b) Date: 4/11/1999 6:42 PM
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All right Tony and other fellow educators, what really is the scoop on these 403(b)'s? All my colleagues keep talking about how great they are, but this link seems to frown on variable annuities. Check out http://www.smartmoney.com/ac/retirement/investing/index.cfm?story=wrongannuities

Am I missing something or are these things a bust?

Thanks,
Dave
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Author: TMFSelena Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 51 of 9935
Subject: Re: My 403(b) Date: 4/12/1999 8:55 AM
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<<All right Tony and other fellow educators, what really is the scoop on these 403(b)'s? All my colleagues keep talking about how great they are, but this link seems to frown on variable annuities...

Am I missing something or are these things a bust?>>

Dave --

It's my understanding that 403(b)s are in most ways very much like 401(k)s, not variable annuities. I've always thought of them as 401(k)s for the non-profit sector. Perhaps you can hold variable annutities in your 403(b), but I think that just as often you can hold mutual funds.

Assuming this is true, then making use of your 403(b) is probably a good idea, as it will permit tax-deferred saving and investing. I myself would look to see if an S&P 500 index fund were one of the options -- that's where I'd put my money, as it tends to outperform most other mutual funds and has lower fees.

If I've misstated anything, someone please correct me. :)

Cheers!

Selena

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Author: DW525 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 52 of 9935
Subject: Re: My 403(b) Date: 4/12/1999 2:41 PM
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That's what I thought to, and then I found this link:
http://www.smartmoney.com/ac/retirement/investing/index.cfm?story=wrongannuities. Thoughts/comments please?

Dave

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Author: TMFSelena Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 53 of 9935
Subject: Re: My 403(b) Date: 4/12/1999 3:09 PM
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That article doesn't seem to say that 403(b)s are the same as annuities. Perhaps I'm misunderstanding what you're asking.

I think that you can make the most of your 403(b) while steering clear of annuities, if that's what you're interested in doing.

Selena

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Author: DW525 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54 of 9935
Subject: Re: My 403(b) Date: 4/12/1999 3:42 PM
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It is my understanding that a 403(b) is also referred to as a "tax-sheltered annuity" or TSA. I guess that's why I'm so confused.

Dave

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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: 55 of 9935
Subject: Re: My 403(b) Date: 4/13/1999 7:52 AM
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Dave writes:

<<It is my understanding that a 403(b) is also referred to as a "tax-sheltered annuity" or TSA. I guess that's why I'm so confused.>>

You will find a short description of a 403b plan in my Foolish Retirement Plan Primer at http://www.fool.com/retirement. That may give you a clearer understanding of these beasties. The real thing to keep in mind is a 403b plan may invest in annuities and/or mutual funds only. Many that invest strictly in mutual funds still go by the name "Tax Sheltered Annuity" despite the fact the contributions are not invested in such a contract, nor do they have to be. Thus, I think you are correct. It's the name some school systems use that's confusing you. OTOH, you should be aware that some employers do mandate that contributions go to an annuity product. You just have to be aware of what your plan requires. The vast majority allow mutual fund investment alone.

Regards..Pixy

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Author: sdcumberledge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56 of 9935
Subject: Re: My 403(b) Date: 4/13/1999 1:53 PM
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You will find that many investors will say that annuities as a whole are investments you should only look at if you are content w/ 6% or so returns annually every year. Most publications decry annuities for people who buy their annuity with after tax dollars. The benefits of a 403 (b) are that the money taken out is pre-tax giving you another benefit and that you may invest them in a variety of funds further increasing your returns. You do not need to leave it in a "fixed annuity".

According to the TMF 8 steps, you should put your 403 (b) money in a 500 index fund. As a new and improved Foolish investor I am mailing in my asset reallocation form today transferring all funds into the index fund offered by my firm.

Good Luck
Scott

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Author: mwilk One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 57 of 9935
Subject: Re: My 403(b) Date: 4/13/1999 6:49 PM
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I had a 403(b) during my tenure at Rutgers, and it caused me a bit of confusion, too. The 403(b) functions in a manner quite similar to a 401(k), namely to provide a financial vehicle for the protection of pre-tax dollars in a retirement plan for working professionals. The 403(b) is different mainly because it is more common among teachers, government employees, and employees of non-profit enterprises.

The association of the 403(b) to the tax-deferred annuity is common because the 403(b) investment options are usually more conservative than those available in the 401(k), and many of those options are annuities. For example, TIAA-CREF, one of the primary vendors of 403(b) services to school and university employees in the nation, was primarily an annuity company, and only recently included less conservative instruments in their package of investment options to its clients. I was only 24 when I first got involved with the 403(b) and the annuity seemed too slow at accumulating wealth, so instead of TIAA-CREF, I chose Valic to coordinate my retirement plan. Valic included an annuity in their options, but also included mutual funds that were much more aggressively growth oriented. My funds with Valic did very well for the time I spent at Rutgers.

I have a sneaking suspicion that the "caretaking" mindset of the government is responsible for the difference between the 403(b) and the 401(k). The 403(b) is less aggressive because the government doesn't really trust us to invest our money wisely (foolishly), so they limit the options available to it's employees (the primary holders of 403(b) instruments). The 401(k) is primarily a private-sector instrument, and therefor the government could care less about potential losses.

The differences could also be a result of public money being invested in private companies, as the matching contributions are "public" monies in most cases, but I prefer my conspiracy-oriented reasoning.

At any rate, don't get stuck buying annuities with your retirement money if you are more comfortable with increased risk, especially if you are young.

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Author: DW525 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 58 of 9935
Subject: Re: My 403(b) Date: 4/14/1999 12:52 PM
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Thanks to everyone who responded to my original post. Mwilk, I to am going through Valic for my 403(b). My concern with them is that they seem to have a lot of hidden charges. I have contacted my Valic rep and will talk to him more about my plan. Check out message 52 on this board where I have provided a link regarding variable annuities.

Dave

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Author: TMF2Aruba Big funky green star, 20000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 59 of 9935
Subject: Re: My 403(b) Date: 4/14/1999 7:30 PM
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Hi Dave!

I'm sorry I'm so late with a response, Pixy and Selena did a great job in addressing 403(b)'s.

I've been investing in my 403(b) (often referred to as a TSA) for many years now. As a teacher, I find this a wonderful way to invest for my future. In my case as a public school teacher in NYS, I can contribute a maximum of $10,000 per year into it, which I do. Obviously, since it's pre-tax money, I don't feel the whole pinch of what comes out of my check, yet the entire amount from each check goes to work for me compounding tax-deferred until I start taking it out years in the future.

I'm fortunate also to work in a district that is very liberal with the companies you may select for the 403(b). Of course, that means that there are many, many "salespeople" who visit the schools trying to get you to deal with their companies (and line their pockets in the process), including companies dealing with (ugh!) annuities.

In my case, I have mine through Vanguard, which the school agrees to deal with, and I set it up myself with no middle man. Payroll automatically takes out the money and sends it to Vanguard who sends me statements. Vanguard has the lowest fees in the industry, and a realm of funds from which to choose. The bulk of what I contribute goes into the Vanguard 500 Index, with which I've been very pleased.

I hope this has helped to answer some of your questions.

Tony
...but I still am...

Off2Aruba



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Author: quaxy Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 60 of 9935
Subject: Re: My 403(b) Date: 4/15/1999 8:11 PM
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My wife and I (both teachers) gave up Valic after about six years of relative stagnation and mystery fees. Our 403(B) is now all in mutual funds.

However, I didn't go with an Index fund and could kick myself now that I'm tracking my dough. It's doing better, though not always keeping up with S&P. Presently, I like Janus. It's been beddy beddy good to me.


I will probably soon make a change, moving any/all low performing funds into an Index fund.


Steve

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Author: DW525 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 61 of 9935
Subject: Re: My 403(b) Date: 4/16/1999 12:58 AM
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Steve:

Thanks for your thoughts on Valic. No wonder I was so confused regarding variable annuities. I was looking through the prospectus and was alarmed when I noticed all the hidden fees. What is a mortality expense anyway? I should have known better when I discovered Valic stood for "Variable Annuity Life Insurance Company." I'm going to look for a different plan administrator to continue my 403(b). Thanks again.

Dave

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Author: smyers3 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68 of 9935
Subject: Re: My 403(b) Date: 4/22/1999 10:17 PM
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DVV525,
Dave,

Just a comment

I started a 403(b) about 1 1/2 years ago, at a time when I was not as FOOLISH as I feel I am now. I too went with Valic, As I have researched their investion choices, the fees,the lack of information on their Company investment options and the cost to withdraw from their system, I went to a more Foolish 401(k) Index Fund with my State Retirement System. I'm also putting money in a number of DRIPS. It just feels better for me. I've left my money in the 403(b) and will watch it. I just think there are better options available.FWIW.

smyers3

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Author: DW525 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69 of 9935
Subject: Re: My 403(b) Date: 4/23/1999 12:45 PM
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smyers3:

I am starting to feel the same way about Valic. There seem to be a lot of hidden fees attached to their company. I'm in the process of freezing my account with them and starting a different account. Thanks for your input.

Dave

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Author: uhdean Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73 of 9935
Subject: Re: My 403(b) Date: 4/30/1999 7:10 PM
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This may dispel some of the confusion. As I understand it (according to my school's literature), there is a 403(b) which is a Tax Sheltered Annuity or TSA. These are usually fixed and variable annuities sponsored by insurance companies. Then there is also a 403(b)(7). This is a custodial account, which is sponsored by a mutual fund company. With the 403(b)(7) you are in control of where your money is allocated. So with the 403(b)(7) you pick the mutual fund(s) that your money goes into. This is the one you want to get into!

Each school might have there choices of which fund companies that you can choose. If you like a particular company (Vanguard, Fidelity, Strong, etc.) you contact them and set up your 403(b)(7) plan with them. Once your account is opened you can start your direct deposits from your paycheck.

I had assets with Fidelity before I started teaching. I found out that Fidelity sponsored 403(b)(7) accounts so I opened one up. With Fidelity I pick the funds I want and can switch into or out of funds as I see fit. There is a small ($12) account management fee, but so far it has been worth it.

Hope this info helps out.

Uhdean Biology teacher in Texas


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Author: TMF2Aruba Big funky green star, 20000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 74 of 9935
Subject: Re: My 403(b) Date: 5/1/1999 9:54 PM
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Hey Uhdean!

Excellent points, and I thank you for pointing those out. You're absolutely right about the 403(b)(7) being accounts where you have control of the funds in which your money is invested. As you said, these differ from the standard 403(b) which are usually referring to annuities affiliated with insurance companies.

It should also be pointed out that anyone currently holding a 403(b) can easily roll it into a 403(b)(7) providing that it's with a company that their school district deals with.

Tony
...but I still am...

Off2Aruba



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Author: jamesshin Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 75 of 9935
Subject: Re: My 403(b) Date: 5/6/1999 8:33 PM
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Hi,

I am a pastor and my wife is a teacher. We are interested in the vanguard index fund but are not sure if we can invest in the fund via 403(b). We are new investors and will not go beyond the maximum for the roth ira. Should we just invest in the vanguard fund through the IRA or look for it through 403(b)?

This is our last decision before we invest so please help.

thanks

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Author: TMF2Aruba Big funky green star, 20000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 76 of 9935
Subject: Re: My 403(b) Date: 5/7/1999 10:13 PM
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I am a pastor and my wife is a teacher. We are interested in the vanguard index fund but are not sure if we can invest in the fund via 403(b). We are new investors and will not go beyond the maximum for the roth ira. Should we just invest in the vanguard fund through the IRA or look for it through 403(b)?

Hi James!

I personally think that the Vanguard Index is a Foolish choice as it mirrors the S&P, and has the lowest fees.

I'm not sure I understand what you mean by "won't go beyond the maximum for the Roth." Do you mean you don't want to do a 403(b) if you invest in a Roth IRA? Or do you mean that you don't know if you "can" do a Roth IRA if you invest in a 403(b)?

I'm going to think you mean the latter, so the answer is you can do both, as long as you meet the income qualifications (translation: you don't make too much). To invest in Vanguard via a 403(b), you'll want to check with your wife's school district to make sure that Vanguard is one of the options they offer. If they don't allow that company, you might want to investigate the companies they do offer to find a similar type of index fund.

Not sure if this helps, but hoping so. ;)

Tony
...but I still am...

Off2Aruba


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