About a year ago, before I became a Fool about investing, we were visited by a friendly man encouraging my wife (a teacher) to contribute to a TSA for retirement. It sounded like a good deal at the time so we signed up.Now I am not so sure it is a great deal. Here is what I now know which I did not know then:-The TSA is a 403(b) retirement plan.-This contract we signed is an annuity with a company calld CGU Life Insurance.-There is a minimum guaranteed interest rate of 3.0%.-There is a stiff surrender charge if we wanted to withdraw.Here is our situation:-Wife is 28.-We both contribute to IRAs-I contibute to a 401(k)So, since we should be aggressively investing for retirement, this annuity thing bothers me. I need your help! The friendly man mentioned above is coming by Sat. to answer our questions on this TSA. I have quite a few in mind, but please offer me your advice. I think what I want is to get the money invested in Mutual Funds instead of the Annuity. My guess is the Annuity is all his company has to offer. How should I prepare??Dozer
You are probably stuck in the annuity unless you want to take the hit from the surrender charges. Many of these things will allow you to surrender without penalty after a few years. Find out if yours has this feature.I would also ask about fees. The primary evil of most annuities is that they have sky high fees in return for not much.If the fees aren't too bad and annuities are your only choice, sometimes they aren't too bad if there are other benefits (like getting to contribute to them pre-tax in a 403b). Many companies offer variable annuities that are basically mutual funds wrapped in an annuity structure. If this is available and the fees aren't too bad and the underlying fund isn't an expensive one, then it might be worth it to go for the variable annuity. You'll have to get more info though.
Try these URLs.http://www.403bwise.comhttp://www.sec.gov/consumer/varannty.htmhttp://www.fool.com//quickfindnew.asp?url=R3http://www.fool.com/retirement/annuities/annuities03.htmBGP
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