High-cost annuities have ABSOLUTELY no place in the 403(b) plans of public school teachers. Every day we are looking at the vendor choices for school districts and have come to this conclusion: They are appalling and are an affront to basic human decency.
Roger Wohlner wrote something today called “Annuities: The Wonder Drug for Your Retirement?” If you are enrolled in a 403(b) plan or know somebody who is, it would be well worth your while to read this.
It is always nice to receive more independent verification of what we have been saying for years.
Though The Chicago Financial Planner does not focus on the 403(b) market, he gives some compelling reasons why teachers should NEVER own, or contribute to, a high-cost variable annuity in their retirement accounts.
Here are some excerpts from his excellent piece:
“The biggest beef about annuities are the fees, which are often hidden or least difficult to find. Many annuity products carry fees that are pretty darn high, others are much more reasonable. In general, the lack of transparency regarding the fees associated with most annuity contracts is appalling.”
“In the case of an indexed annuity product the fees are just plain murky.”
“Surrender charges are fees that are designed to keep you from withdrawing your funds for a period of time. From my point of view these charges are heinous whether in an annuity, a mutual fund, or anyplace else. If you are considering an annuity and the product has a surrender charge, avoid it.”
“For example, an insurance agent or registered rep is not going to show you a product from someone like Vanguard that has ultra-low fees and no surrender charges because they receive no commissions.”
“Annuities are generally sold rather than bought by Baby Boomers and others. Be a smart consumer and understand what you are buying, why a particular annuity product (and the insurance company) are right for you, and the benefits that you expect to receive from the annuity.”
If you work in a public school, or any other non-profit organization, it is time for you to ask some serious questions about why your particular annuity is right for YOU and not the salesperson.
If you need any help let us know. We get no greater satisfaction from our work than liberating hard-working, public servants from these awful products.