403(b) & 457 Investing News

Facts About Retirement and Investing in a 403b

ü  CalSTRS will replace approximately 56% or your pre-retirement income.

ü  When looking to start a 403b ask these questions before you decide to work with a financial advisor;

  • Are you acting in a fiduciary capacity?
  • What is your education and background?
  • How long have you been practicing?
  • Are you registered with the Securities and Exchange Commission?
  • Are you registered with the California Department of Corporations?
  • Do you have an insurance license?
  • What credentials have you earned?
  • Have you ever been disciplined for unethical or illegal conduct?
  • Are you limited in the types of products and services you can recommend to me? If so why?
  • Do you have any securities licenses? If so, what?
  • Tell me about your investment philosophy and typical clients.
  • May I see a list of references?
  • Do you have any conflicts of interest here?
  • If I do decided to with you, how often will we need to meet, and will I meet with you or an assistant?

Check on their fees and how they get paid;

  • Are you employed by a particular 403(b) or 457 plan vendor or are you an independent agent?
  • How will you be paid, flat fee, fee-based, hourly, or/and do you receive commissions on the products you sell?
  • Do you represent a specific mutual fund company or insurance company?
  • Do you receive any other consideration from the companies you represent or the vendors whose products you recommend, such as bonuses or finder’s fees?
  • Please disclose, in writing, all fees, direct or indirect, that are included in the product(s) you are recommending to me.

ü  Become informed on the products you are buying, before you buy anything.

ü  Define your goals

  • When do you want to retire
  • How much money do you need to take home each month to pay your expenses

ü  Compare different investment options

  • Filed annuities
    • Offered by insurance companies
    • Provides an annuity or fixed income to you for life (or other period, such as the life of you and a dependent) or lump sum
    • Generally offers two interest rates; a guaranteed rate for a set period of time and current interest rate
    • Guarantee of you principal
    • May offer a bonus rate
    • Contributions are invested in the insurance company’s general investment portfolio- usually high-grade bonds and government securities
    • Can only be sold by a licensed insurance agent
    • Often includes surrender fees
    • Regulated by Department of insurance
  • Equity-indexed annuities
    • Contract between you and insurance company
    • There is a guaranteed minimum interest rate and an additional rate tied to an index
    • There many different indexing methods used
    • Regulated by state Department of Insurance
    • If index drops, they make up company profits next period from your profits
    • Sold by licensed insurance agents, not a financial advisor
  • Variable annuities
    • Sub-account options- check types of investment funds (stocks, bonds, money market, etc.)
    • Mortality & expense fee or a death benefit provision that pays the beneficiary the greater of the account value or total contributions
    • Review surrender fees or contingent deferred sakes charge
    • Ratings of financial strength and stability of insurance company
    • If you have decided to invest in the market (mutual funds sub-accounts), why not invest directly in mutual funds and avoid the insurance company fees?
    • You can purchase an annuity with your 403(b) or 457 savings when you retire and avoid paying insurance company fees whiles you’re building you savings
  • 403(b)(7) Custodial Accounts- Mutual Funds
    • investments that pool money from investors and invest in stocks, bond and or other securities such as money markets
    • the investor owns shares in the mutual fund
    • liquidity: Shares can be sold quickly and with no price discount
    • Mutual funds may be actively or passively managed
    • Expertise & resources of professional money mangers
    • Immediate diversification (although some funds are less diversified that others)


Check out CTA’s investment website for more information.  CTAinvest.org

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