No. of Recommendations: 0
My wife is a teacher at a public school and is
thus eligible for a 403(b). From what I have read,
she can either invest in mutual funds or variable
annuities. Any suggestions on which would be better?

thanks,
John
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No. of Recommendations: 0
My wife is a teacher at a public school and is
thus eligible for a 403(b). From what I have read,
she can either invest in mutual funds or variable
annuities. Any suggestions on which would be better?


The mutual funds are going to be a better bet for her. Annuities invest in mutual funds, but you pay an extra fee on them for the benefit of having them be tax-deferred. Her 403(b) is already tax-deferred. Therefore, if she invests in annuities, she is paying an extra fee for something she already gets for free.

Leviathan
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My wife is a teacher at a public school and is thus eligible for a 403(b). From what I have read, she can either invest in mutual funds or variable annuities. Any suggestions on which would be better?

The mutual funds are going to be a better bet for her. Annuities invest in mutual funds, but you pay an extra fee on them for the benefit of having them be tax-deferred. Her 403(b) is already tax-deferred. Therefore, if she invests in annuities, she is paying an extra fee for something she already gets for free.

Leviathan


What Leviathan wrote is generally true about annuities. However, there are a few places where annuities can be much cheaper than many mutual funds. One such place is TIAA-CREF. They offer their annuities mostly to universities, but have recently been expanding to some K-12 school systems. Make sure you check the total expenses for all mutual funds and all annuities with any companies that are involved in the plan. If the mutual funds have loads and 12-b expenses, they may be more expensive than the annuities. Get all the materials and prospectuses from the various companies for all the mutual funds and annuities.

You might want to read up on the Fools notes about Foolish 401-Ks (which still apply to 403-bs!).
http://www.fool.com/money/401k/401k.htm

You can read about annuities at Quicken's site at:
http://www.quicken.com/annuities/

Do your own research and look at all the options and fees. Hope this helps.

Taylor
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My wife is a teacher at a public school and is
thus eligible for a 403(b).


Find out if she can have a 403(b)7 at a mutual fund provider first. If she can, you could do a lot worse than Vanguard where she can use VFINX, Vanguard's 500 Index fund.

One other thing about annuities. Most providers will let you borrow against them. Not so with the mutual fund 403(b)7 alternative. Just for what its worth.....

FoolishProf
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