The Advisor - September 2011

IMPORTANT NEWS FOR YOUR FINANCIAL AND PERSONAL FUTURE

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What CTA Is Doing On Your Behalf


CTA recognized that educators need help with their 403(b) and 457 plans. In 2008, CTA began a strategic initiative to improve the 403(b) and 457 market for educators. Here is a list of some of the CTA objectives:

  • Increase awareness of the need to supplement pensions through 403(b) and 457 plans.
  • Provide investment education to encourage better 403(b) and 457 decisions.
  • Promote union advocacy at the local chapter level to improve 403(b) and 457 programs.
  • Develop best practices for 403(b) and 457 vendors, including transparency and fee disclosure.
  • Create 403(b) and 457 plans that meet CTA due diligence standards.

CTA Resources for You

CTAinvest.org – CTA’s education portal (no login required)

We’ve developed CTAinvest.org with resources for you, including videos, calculators, informative articles, Ask the Advisor and more. We continually seek ways to make the site more useful.

Videos – These videos are short, easy to understand and created specifically for educators.

  • What Educators Need to Know about Social Security – NEW!
  • The Truth About Variable Annuities – NEW!
  • A Look at Target Date Funds
  • The Impact of Fees on Your 403(b) or 457 Plan – NEW!
  • Finding a Trustworthy Financial Advisor – NEW!
  • Why Participate In a 403(b) or 457 Plan?
  • A Look at Fixed Annuities
  • Choosing a 403(b) or 457 Product
  • Comparing 403(b) and 457 Plans

Calculators – These are simple and intuitive calculators to help you with your retirement planning.

  • What Will It Cost to Borrow from My 403(b) or 457 Plan?
  • How Long Will My Savings Last?
  • How Much Can I Save by Consolidating My Debt?
  • How Much More Do I Need to Save for Retirement?
  • How Will Pretax Contributions to My 403(b) or 457 Plan Affect My Take-Home Pay?
  • Projected Retirement Expense Calculator
  • How Will Fees Affect My 403(b) or 457 Plan Savings?
  • How Much Can I Save in My 403(b) or 457 Plan?

Financial planning checklist - You can choose to be reminded of specific financial tasks by email on a schedule you select. For example, you can ask for these reminders in a certain number of days, weeks, months or a year:

  • I have ordered my free annual credit report from www.annualcreditreport.com and reviewed it for errors (Once a year).
  • I have estimated how much money I will need to live comfortably in retirement (Once a year).

Ask the Advisor - Here are two sample questions and answers you will find in this section:

Question: I just discovered that my 403(b) annuity includes surrender charges. What should I do?

Answer: Often surrender fees are not clearly disclosed to the participant. Now that you have identified these fees, you have some choices.

  1. You can stop contributing to the annuity and wait out the surrender period until it reaches 0% before cancelling.
  2. You can choose to cancel the contract and pay the surrender fees. Then you can transfer your balance to a new 403(b) provider subject to the rules or provisions in your district’s plan.
  3. You can keep contributing to the annuity and cancel when the surrender period is up, provided the surrender period is based on the date of the contract and not on the premium payment dates.

Question: I have a TSA with a company that is not on my district’s approved list. I have another TSA which is on the approved list. Can I transfer my “non-approved” TSA funds to my “approved” TSA?

Answer:You will need to check with your district to find out whether contract exchanges are permitted under the plan. The district’s written plan will state whether exchanges are permitted and, if so, which vendors are approved for a contract exchange. A contract exchange is the movement of all or some portion of your 403(b) account held with one vendor to another vendor that is part of your district’s plan. If exchanges are permitted, then generally you may transfer only among approved vendors, and the vendors must have an information sharing agreement with your district. In addition, it is often permissible to transfer from a non-approved vendor to an approved vendor, even if there is not an information sharing agreement in place.

You should also consider any backend sales charges (these are fees charged by mutual funds or variable annuities when you move or transfer your funds) or surrender fees (these are fees charged by fixed or variable annuities when you move or transfer your funds) that may be involved if you decide to transfer from one vendor to another.

For information on exchanges between vendors that is specific to your plan, please contact your district.

Comprehensive Consumer Guides

“Closing the Gap: Supplement Your Pension Benefits with a 403(b) or 457 Plan” – This booklet explains the basics of 403(b) and 457 plans, including the tax advantages, how they work, how much you may be able to save, and tips for choosing investment products from the choices within your plan.

“Selecting a Financial Advisor & Understanding Plan Fees” – This booklet is a comprehensive review of fees and expenses charged by financial advisors, vendors and investment products, and includes a checklist for you to take to your financial advisor to make sure you are getting the information you need in writing to make informed choices. See the resource section at the end of this article for sample questions to ask your financial advisor.