Is Your Fixed Annuity Keeping Up with Inflation?

RSS
Please rate this page.

Many educators choose fixed annuities for their 403(b) or 457 plan investments because they see them as “safe.” They’re guaranteed, right?*

But before you get too comfortable with fixed annuity guarantees, think about the purpose of saving in a 403(b) or 457 plan. Since you already have a guaranteed benefit – your CalSTRS or CalPERS plan – a 403(b) or 457 plan provides an opportunity to supplement your pension with other types of investments, such as stock mutual funds, that may offer better potential for long-term growth than a fixed annuity.**

What Is Your Fixed Annuity Earning?

If you have a fixed annuity product, read the online or written materials provided by the issuing insurance company or go to 403(b) Compare to find out what rate your fixed annuity is paying, as well as the fees and expenses. Check on the:

  • Current interest rate
  • Minimum interest rate
  • Surrender charges and period

If you are unhappy with the fixed annuity, you have several options:

  • If the surrender fees are not prohibitive, consider immediately transferring your existing account and future contributions to a new product.
  • If the surrender fees are significant, consider freezing your account (making no new contributions) and begin contributing to a new product.
  • When the surrender fees have lapsed or reached a reasonable level, consider transferring the remaining assets to a new product.

To change your investments, contact your 403(b) or 457 plan sponsor.

* Fixed annuity guarantees are dependent on the financial strength and stability of the issuing insurance company.

** Past performance is not a guarantee of future results.


* Source: U.S. Bureau of Labor Statistics, www.bls.gov.

** Source: www.annuityratewatch.com. Average rates for 5-year multi-year guaranteed annuities (MYGAs); your rate will vary. Note that MYGAs are annuities that guarantee a specific rate as long as the surrender period is in effect. Past performance is not an indication of future results.