Monday, August 31, 2009

Retirement Accounts

Lately I've been wary of retirement accounts because:

- they may be taken over by the government by the time I retire
- due to inflation the money could be worth very little by the time I retire

For these reasons I closed out my account (tax penalty and all) when I quit my last job and did other things with that money.

I planned to not start a 403(b) ever again.

However, one of the places I am working is offering a double match. If I contribute 5% of my salary, they contribute an additional 10%. That is a lot of money and it is tempting. However, I resent the fear-mongering ("you need over 2 million dollars to retire") and bad financial advice ("markets always go up") given by the shady sales people that work for these companies.

Right now I am leaning toward opting out, but the 10% is pulling me back in. To be eligible for a double match from the school, I'd have to enroll by the end of September.

With the assurance that I in no way hold you responsible for what I decide, does anyone have any thoughts or advice on this?

Choices offered (I don't fully understand what these mean):

- Multi-asset - mutual fund
- Equities - variable annuity and mutual fund
- Real estate - variable annuity
- Fixed income - variable annuity and mutual fund
- Money market - variable annuity and mutual fund
- Guaranteed - guaranteed annuity

From Fidelity
- "Freedom fund" - mutual fund, seems to have no employee freedom, Fidelity chooses allocations
- "Money market trust"
- Not sure what else; didn't give much information
- NO "SELECT" PORTFOLIOS including gold, energy, etc.

Update: the "select" sector funds ARE being added to Fidelity's options starting in January

1 comment:

  1. There is some truth to the fear-mongering if you have no other income in retirement and live more than 20 years or end up in a nursing home.

    Most companies nixed retirement matching. Back when they did match it was usually only up to 3% of salary. 10% match is unheard of (though not overly surprising in academia). But 10% doesn't mean it will be a good investment.

    Limited info is provided. I assume more details are given in the info the employer provided. If not, TIAA-CREF should have a brochure with a paragraph or two description of each of those funds as well as the more detailed prospectus.

    It looks like the 403 gives you 8 investment options, 6 through TIAA-CREF & 2 through Fidelity.

    Multi-asset may be a mixed bond & stock fund.

    Equities is a stock fund. Possibly an index fund.

    Real estate is most likely a REIT. I can't imagine TIAA-CREF has the best REIT in the world, but I'm just speculating about that.

    Fixed income may be a bond fund.

    Money market is a savings account.

    Guaranteed annuity is probably some sort of insurance annuity. It guarantees a certain payment each year of retirement based on the amount put in.

    Freedom fund is either a stock fund or a stock/bond fund.

    Money market trust is a savings account.

    If they allowed you to invest in any Fidelity Fund, that would give you almost unlimited selection. That with a 10% match would be very compelling.

    Ask the TIAA-CREF salesperson to see the results for their funds for each decade since 1920. Adjust the results for inflation ( If different from the sales pitch, question them on it.