Help with prospectus! **Updated information

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physed87
Posts: 17
Joined: Mon Jan 17, 2011 4:58 pm

Help with prospectus! **Updated information

Post by physed87 » Thu Jan 27, 2011 6:06 pm

I am still looking into my 403b options which just seem to be getting worse the longer I investigate. This prospectus is from an AF Advantage Variable Annuity through American Fidelity. I copied and pasted the fee table. Thoughts?

************************************************************



FEE TABLE
The following tables describe the fees and expenses you will pay when owning, withdrawing amounts
from, or surrendering your policy. The first table describes the fees and expenses that you will pay at the time you
withdraw from your policy or surrender your policy. State premium taxes may also be deducted.
Contract Owner Transaction Expenses
Withdrawal Charge (as a percentage of the amount withdrawn in excess of the free withdrawal amount as described
elsewhere in this document)
Policy
Year
Withdrawal
Charge
1 ..................................................................................8%
2 ..................................................................................7%
3 ..................................................................................6%
4 ..................................................................................5%
5 ..................................................................................4%
6 ..................................................................................3%
7 ..................................................................................2%
8 ..................................................................................1%
9+ ..................................................................................0%
Transfer Fee There is no charge for the first 12 transfers in a policy year during the accumulation
period and no charge for the one transfer allowed each policy year during the
annuity phase; thereafter, the fee is the lesser of $25 or 2% of the amount
transferred. (Transfers made through automatic dollar cost averaging and asset
rebalancing count toward the free transfers).
Loan Fee 5%(1)
The next table describes the fees and expenses that you will pay periodically during the time that you own
the policy, not including the portfolio fees and expenses.
Annual Expenses(2)

Policy Maintenance Fee ......................................................................................$15
Separate Account Annual Expenses (as a percentage of average account value)

Mortality and Expense Risk Charge ................................................................................... 1.25%
Account Fees and Expenses
Administrative Charge ...................................................................................15%
Distribution Expense Charge .....................................................................................10%
Total Separate Account Annual Expenses.......................................................................... 1.50%
______________________________
(1) We charge an interest rate of 5%.
(2) We currently charge lower fees than the maximum allowed under the policy. The current fees and maximum fees we may charge are shown
in the Annual Expenses table. We may increase the administrative charge and/or distribution expense charge, but neither will ever be more
than 0.25% of the average daily value of your participant account invested in a portfolio. We may increase the policy maintenance fee, but it
will not be more than $36 per policy per year.

The next table shows the minimum and maximum total operating expenses charged by the portfolio
companies that you may pay periodically during the time that you own the policy. Additional details about each
portfolio’s fees and expenses are contained in the prospectus for each portfolio.
Total Annual Portfolio Operating Expenses
(expenses that are deducted from portfolio assets, including
management fees, 12b-1 fees and other expenses)
MINIMUM
0.21%
MAXIMUM
1.38%

Annual Portfolio Operating Expenses (expenses that are deducted from portfolio assets)
American Fidelity Dual Strategy Fund, Inc. ®
Management Fees........................................................ 0.50%
Other Expenses............................................................ 0%
Total Annual Portfolio Operating Expenses................ 0.50%

American Century Variable Portfolios, Inc. (1)
VP Balanced Fund
Management Fees........................................................ 0.90%
Other Expenses............................................................ 0.01%
Total Annual Portfolio Operating Expenses................ 0.91%
VP Capital Appreciation Fund
Management Fees........................................................ 1.00%
Other Expenses............................................................ 0.01%
Total Annual Portfolio Operating Expenses................ 1.01%
VP Income & Growth Fund
Management Fees........................................................ 0.70%
Other Expenses ........................................................... 0%
Total Annual Portfolio Operating Expenses................ 0.70%
VP International Fund
Management Fees........................................................ 1.36%
Other Expenses ........................................................... 0.01%
Acquired Fund Fees & Expenses ................................ 0.01%
Total Annual Portfolio Operating Expenses................ 1.38%

BlackRock Variable Series Funds, Inc. (2)
Basic Value V. I. Fund
Management Fees........................................................ 0.60%
Other Expenses ........................................................... 0.08%
Total Annual Portfolio Operating Expenses................ 0.68%
Capital Appreciation V.I. Fund
Management Fees ....................................................... 0.65%
Other Expenses ........................................................... 0.12%(3)
Total Annual Portfolio Operating Expenses................ 0.77%
Global Allocation V.I. Fund
Management Fees ....................................................... 0.65%
Other Expenses ........................................................... 0.15%
Acquired Fund Fees & Expenses ................................ 0.03%
Total Annual Portfolio Operating Expenses................ 0.83%

Large Cap Growth V. I. Fund(4)
Management Fees ....................................................... 0.65%
Other Expenses ........................................................... 0.14%
Total Annual Portfolio Operating Expenses................ 0.79%
Value Opportunities V. I. Fund
Management Fees........................................................ 0.75%
Other Expenses ........................................................... 0.12%
Acquired Fund Fees & Expenses ................................ 0.02%
Total Annual Portfolio Operating Expenses................ 0.89%

The Dreyfus Socially Responsible Growth Fund, Inc (5)
Management Fees........................................................ 0.75%
Other Expenses............................................................ 0.14%
Total Annual Portfolio Operating Expenses................ 0.89%

The Dreyfus Stock Index Fund, Inc. (5)
Management Fees........................................................ 0.25%
Other Expenses............................................................ 0.04%
Total Annual Portfolio Operating Expenses................ 0.29%

Dreyfus Variable Investment Fund (5)
Growth and Income Portfolio(4)
Management Fees........................................................ 0.75%
Other Expenses............................................................ 0.13%
Total Annual Portfolio Operating Expenses................ 0.88%
International Value Portfolio
Management Fees........................................................ 1.00%
Other Expenses............................................................ 0.32%
Total Annual Portfolio Operating Expenses................ 1.32%

Dreyfus Investment Portfolios (5)
Technology Growth Portfolio
Management Fees........................................................ 0.75%
Other Expenses............................................................ 0.11%
Acquired Portfolio Fees and Expenses........................ 0.01%
Total Annual Portfolio Operating Expenses................ 0.87%

Vanguard® Variable Insurance Fund*
Balanced Portfolio
Management Fees........................................................ 0.19%
Investment Advisory ................................................... 0.09%
Other Expenses............................................................ 0.03%
Total Annual Portfolio Operating Expenses................ 0.31%

Capital Growth Portfolio
Management Fees ....................................................... 0.26%
Investment Advisory ................................................... 0.15%
Other Expenses ........................................................... 0.04%
Total Annual Portfolio Operating Expenses................ 0.45%

* Vanguard is a trademark of The Vanguard Group, Inc.

Small Company Growth Portfolio
Management Fees........................................................ 0.23%
Investment Advisory ................................................... 0.12%
Other Expenses............................................................ 0.05%
Total Annual Portfolio Operating Expenses................ 0.40%

Total Bond Market Index Portfolio
Management Fees........................................................ 0.17%
Investment Advisory ................................................... 0.01%
Other Expenses............................................................ 0.03%
Total Annual Portfolio Operating Expenses................ 0.21%
____________________
Last edited by physed87 on Fri Jan 28, 2011 9:10 am, edited 1 time in total.

DSInvestor
Posts: 10877
Joined: Sat Oct 04, 2008 11:42 am

Post by DSInvestor » Thu Jan 27, 2011 6:24 pm

Wow, you have a high cost plan. The fund expense ratios range from 0.21 to 1.38% but that's on top of the 1.50% charged for the variable annuity (mortality and expense risk, admin charge, distribution charge etc).

Here are the two lowest cost options:
Total Bond Market Index Portfolio 0.21% + 1.50% = 1.71% (a very high expense ratio to pay for a bond fund)

Dreyfus Stock Index Fund 0.29 + 1.50% = 1.79%!

You'd get a tax deduction for contributing to this high cost 403b but it may be worth looking at your other options (spouse's 401k/403b, Traditional IRA or Roth IRA) before contributing to this plan. How much are you planning on contributing to your retirement accounts each year? Is there an employer match and do you need to contribute in order to get the match?

sscritic
Posts: 21858
Joined: Thu Sep 06, 2007 8:36 am

Re: Help with prospectus!

Post by sscritic » Thu Jan 27, 2011 6:41 pm

physed87 wrote: Mortality and Expense Risk Charge ................................................................................... 1.25%
Account Fees and Expenses
Administrative Charge ...................................................................................15%
Distribution Expense Charge .....................................................................................10%
Total Separate Account Annual Expenses.......................................................................... 1.50%
I think you left out a zero, or at least a space.

Code: Select all

Mortality and Expense Risk Charge ...................................... 1.25% 
Account Fees and Expenses
Administrative Charge ...................................................0.15%
Distribution Expense Charge ............................................ 0.10%
Total Separate Account Annual Expenses.................................. 1.50%
1.25% plus 0.15% plus 0.10% equals 1.50%

physed87
Posts: 17
Joined: Mon Jan 17, 2011 4:58 pm

Post by physed87 » Thu Jan 27, 2011 6:42 pm

No match. I already max out my Roth every year. I would probably contribute 6,000 a year to the 403b. I am a single mom so I am on my own.

Anymore opinions on this? This is the reason I have not contributed to my 403b in about 6 or 7 years. Is the tax deduction really worth it since I have such a good pension being a teacher?

Kim

hlfo718
Posts: 771
Joined: Wed Dec 01, 2010 9:17 am
Location: NYC

Post by hlfo718 » Thu Jan 27, 2011 9:14 pm

Can't you just buy an index fund on your own since is low turnover your gains are deferred? I would not invest in those funds given the charges.

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grabiner
Advisory Board
Posts: 22564
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Post by grabiner » Thu Jan 27, 2011 10:09 pm

physed87 wrote:No match. I already max out my Roth every year. I would probably contribute 6,000 a year to the 403b. I am a single mom so I am on my own.

Anymore opinions on this? This is the reason I have not contributed to my 403b in about 6 or 7 years. Is the tax deduction really worth it since I have such a good pension being a teacher?
How long do you expect to stay with this school? You're paying 1.5% extra a year, but only as long as you stay there; when you leave, you can roll over the 403(b) to an IRA and continue to gain the benefit of tax deferral without the high fees. Thus, unless you expect to stay 20 years, you would probably be better off with the 403(b) than with a taxable account.

But you mention that you are a single mom; rather than paying high fees to invest in the 403(b), you might want to invest in a 529 plan for your child(ren)'s college savings. You still get tax deferral, and you don't pay the high fees.
Wiki David Grabiner

Abbey
Posts: 33
Joined: Wed Feb 24, 2010 4:18 am
Location: Texas

Post by Abbey » Thu Jan 27, 2011 10:12 pm

What state are you in? Vanguard is an option in Texas.
You might call the 403(b) administrator and get a list of non-annuity options if you haven't already done that.
Abbey

bdpb
Posts: 1525
Joined: Wed Jun 06, 2007 3:14 pm

Post by bdpb » Fri Jan 28, 2011 12:56 am

Do you have a mortgage? What is it's rate and is fully deductible?
You might weigh the 403b against paying down your mortgage.

physed87
Posts: 17
Joined: Mon Jan 17, 2011 4:58 pm

Post by physed87 » Fri Jan 28, 2011 8:16 am

To answer all your questions.

I have 15 more years to teach until full retirement.

I do already invest in a 529 for my son but could contribute more each month.

I just paid off my mortgage so I have no debt.

I teach in a small school so we have no HR dep't and no non-annuity options. I have already spoken with my superintendent about this issue.

Needless to say, since I just paid off my mortgage this week I will have more of a cash flow going forward and need to figure out where it will benefit me the most.

Just an FYI, I am in the 15% tax bracket and claim head of household.

Kim

Abbey
Posts: 33
Joined: Wed Feb 24, 2010 4:18 am
Location: Texas

Post by Abbey » Thu Feb 03, 2011 6:49 am

This was my situation for many years, too. I maxed out my Roth every year which I'm sure you do. The 529 might be a good plan although Texas' are not too good as I recall.
When you children are old enough to legitimately help, pay them half and half. Half to them and half into a Roth in their names. Be careful to keep very good records of very legitimate jobs at market rates (after-school/PTA night babysitting or yardwork.) You'll probably have to start with a credit union IRA account with very small accounts but you can transfer it later.
Ask your superintendent if you can be on the 403 committee and advocate for moving to a lower cost structure. There are a number of threads on this site about choosing plan administrators. This is a long-term solution; it may take several years to implement.
Personally I didni't participate in the 403(b) until I moved to a new district with better options.
Abbey

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