403b Retirement Plan Options for Teachers
As a teacher, you may be contributing to your school district’s 403b retirement plan, which is a great way to save for your retirement. But, you may have noticed that you’re just not getting ahead. You may even have opened your statements to discover that you’ve lost more than you contributed that particular month! How frustrating is that? Very!
Luckily, there’s good news for teachers in the Dallas / Fort Worth area and throughout Texas. Texas teachers can take control of their 403b retirement plans. Today’s Texas teachers have the option of moving their 403b monies from variable annuity ownership into fixed index annuity ownership.
What is a 403b Retirement Plan?
A 403(b) is the teaching profession’s equivalent of a 401(k) investment plan. Variable annuities were particularly popular in the 1980s and 1990s during times of strong market growth. They provide exposure to the market upside, but do not offer principal protection or performance guarantees.
Variable annuities made sense for some investors when markets were going strong. However, markets don’t always go up. In fact, there have been two 50% stock market drops since 2000. These drops took a toll on millions of Americans’ retirement accounts. Many investors, including teachers, are now demanding options that offer principal protection, performance guarantees, and the potential for growth. For teachers and their 403(b)s, an FIA can provide these benefits and more.
Fixed Index Annuities and 403bs
As part of a 403b retirement plan, a fixed index annuity provides the opportunity to participate in potential stock market gains. However, unlike a variable annuity, the account’s principal––including any gains made from contributions, bonuses, or positive stock market performance––is locked in and 100% protected by the insurance company against any losses.
Every deposit (from payroll deductions) you put in is going to get an immediate return of up to 12% in the form of a bonus for the life of the contract. As the market goes up in a given year, you’re going to make not only up to 12% from the bonus, but you’re also going to make a portion of any market gains on top of that. Once you have that gain, it locks in and becomes your principal, even if the market goes down in the future.
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Planning for the Future
It is possible to perform a 403b rollover tax-free, but with some caveats. The IRS offers a rollover chart with detailed account specifications and limitations. With the fixed index annuity, there are a few important things that you need to be aware of. Number one is that the money you put in is 100% guaranteed by the insurance company to not go down in value. The second thing is that you’re going to participate in the stock market gains in a good year, but most importantly, not participate in the losses in a bad year. That money is going to basically lock in every year that you have a gain, so once you have a good year, it locks in and becomes your principal and is now 100% guaranteed.
Consider the features of a fixed index annuity if you are thinking, ‘I’ve only got X amount of years until I retire. I’ve got to make some money, and I most importantly can’t afford to lose money.’
Our professionals can help you take a look at your 403b retirement plan and make sure it’s working in your favor.
Disclosure: Indexed annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation growth, if any, of a stock market index. Such contracts have substantial variation in terms, costs of guarantees and features and may cap participation or returns in significant ways. Any guarantees offered are backed by the financial strength of the insurance company, not an outside entity. Investors are cautioned to carefully review an indexed annuity for its features, costs, risks, and how the variables are calculated.
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Cathy Talks 403bs on DeWitt & Dunn Financial Services Radio.
Want to hear a clear explanation and some examples of how we have helped teachers improve their 403b plans? Watch the video below to learn how we have helped teachers get the most out of their plans.
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Disclosure: For informational and educational purposes only. The information contained herein may contain information that is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor.
Indexed annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation growth, if any, of a stock market index. Such contracts have substantial variation in terms, costs of guarantees and features and may cap participation or returns in significant ways. Any guarantees offered are backed by the financial strength of the insurance company, not an outside entity. Investors are cautioned to carefully review an indexed annuity for its features, costs, risks, and how the variables are calculated. A fixed annuity is intended for retirement or other long-term needs. It is intended for a person who has sufficient cash or other liquid assets for living expenses and other unexpected emergencies, such as medical expenses. A fixed or indexed annuity is not a registered security or stock market investment and does not directly participate in any stock or equity investments or index.
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