403b Retirement Plan Options for Teachers

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403b Retirement Plan Options for Teachers

By Cathy DeWitt Dunn

403b plan retirement income graphic

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. Nearly 80% of all 403(b) money is tied up in annuities, with the majority in variable annuities. 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 offers 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 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. There are a variety of options available to choose from, but one popular option provides a 12% bonus on your contributions.

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

The great news is that there’s no fee whatsoever associated with rolling over your money. Right now, if you’re sitting inside of a variable annuity, you’re paying fees and transaction costs. Also, this rollover of your money from your current 403b to an FIA in a 403b plan is not a taxable event.

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 experts can help you take a look at your 403b retirement plan and make sure it’s working in your favor. 

403b Assistance Request

Fill out the form below to request assistance with your 403b plan

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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