Saturday, August 30, 2008

Why the blog?

I worked for several years at UTP and helped many teachers, classifieds and administrators with their retirement plans. I tried to educate folks about options but also about strategies. THe product won't be as important as the strategy. So talk, learn and stay on top.

I stopped helping folks with pensions (but the kind folks at utah pension services are still around to help) because I found something easier and more rewarding. I first found a product that helped my friends with weight control and then started selling it and quickly made a career out of it. So now I'm all about FORM and myo3 world ( but I don't want to leave my friends and the folks who helped my children at the mercy of folks who may not be telling them the entire story.

If you have questions about weight control, extra income, or health email me. If you have questions about retirement you can email me as well, but I might have someone else respond- options change with time and I'd like to keep you current.

Good luck

Indexed Annuities

An Indexed product is very similar to a variable product. The difference is that they can have a floor as well as a ceiling- at least the good ones do. A floor means that you will be guaranteed a minimum rate of return. Even if it is ZERO, that is good because it means if the market drops you never lose money. Your money is yours- KEEP IT SAFE.

The ceiling is the same but at the top end. If the market goes through the roof you will have an upper limit and never earn more than that limit. This may sound like a weakness, and it is if the floor is low AND the ceiling is low. Why would someone invest in a product that has a floor of 0 and a ceiling of 1?

Hopefully this point is sinking in. Okay so what is a good range? It will vary from year to year. What company has the best range? Ask your Utah Pension Rep. :)

Even if you can discover all the packages for all the companies they are going to confuse you a bit more. How? Participation Rates. This is how companies determine how closely your investment will mirror the index it is tied to. Does it go up point for point with the index (100% participation) or does the market have to go up 2 points for your product to go up 1 point (50% participation). Participation Rates vary from company to company... as do fees! So look out.

Variable Annuity

If a fixed product is not exciting enough for you you may be interested in a variable product. Variable means the returns can vary. Think of variables as similar to your 401k. The advantage is you can take 1 dollar and turn it into 1,000. The disadvantage is you can take 1,000 and turn it into 1.
Some folks will tell you these are a good option for younger teachers because you have the time to lose today because you can make it up years later. WOW! This is pretty silly. Your money is yours and you should never be content to lose some now in the hope to win some later.

Variables come in all shapes in sizes. Some are index tied, others are small cap or others are large cap.... the short is they are all risky, and I encourage you to think twice before choosing one of these.

Also, if your 401k is variable- no sense putting all your eggs in this basket. Diversify.

Fixed Annuities

Within the 403B retirement category there are three basic options: Fixed, Variable and Indexed.
A Fixed product (called an annuity) is conceptually familiar to most. It is a lot like a CD. You make a contract with a company and they guarantee you a pre-determined rate of return. It won't go up, but it won't go down. Fixed annuities are conservative investments and usually make sense for employees who are approaching the end of their carers. Why? You have worked hard for your money, in the last few years you should plan to protect your nest egg even if it means you don't make as high of a return as possible.
You will most likely never get rich with a fixed annuity, but you have the piece of mind of knowing that what you have is yours and you know how it will grow, guaranteed. The vendors available in your district will all offer fixed products. But are they all equal? NO WAY! Today I can quote three different fixed products from three different approved vendors and they will vary in return rates from 2-6% each year. Add to the differing returns the fees that may or may not be charged and you can see why choosing the correct COMPANY is almost as important as choosing the right strategy (fixed vs variable).
The Good News is this- no matter what you are funding, what you have funded, or what you will fund this year- you can always change your contribution amount and company at any time with a simply salary reduction agreement. You can even scoop the money you have in one company and move all of it to another if you wish.
A WORD OF CAUTION: some annuities have surrender periods- this means if you move your funds too soon they will charge you very painful early surrender penalties. So make sure you talk to someone who knows the rules and penalties with all of the companies you may use.

403B- your options

Other than the state sponsored 401k you can choose from a variety of indpendent (403B) vendors. 403b is a tax code just like 401k- the numbers are meant to be confusing but don't worry about it. Your independent vendors are the charming folks who come to your school , barge into your classrooms and try to convince you that there company is the best in the world (companies like ING, AXA, LSW, GA, Prime America...).
The majority of these reps are good folks who mean to do well and help you as much as possible. The problem is that they can only place you with products there company offers. This means that the ING guy can only sign you up for ING. The AXA guy can only work with AXA... IF there company has the best option for the type of plan you like, then you will be well taken care of. The downside should be obvious- IF you have a rep from one of these companies they will more than likely NEVER tell you to go to another company. In the market these types of agents are called 'captive agents', because they are captive to the line of products their company offers.
There is only one company that is permitted into your schools who represents EACH and EVERY vendor, UTah Pension Services. They can speak to you concerning ING, AXA, LSW etc...
The advantage to you- unbiased opinion and a frank analysis of products across every company resulting in your obtaining the best option possible.

Utah Retirement Systems (URS)

First let's talk a bit about the URS system. This is run by the state of Utah and is a basic 401K model for retirement. What does that mean? That means you can pick general classes of funds (Income to Long Horizon) and cross your fingers and hope these generic groups of funds perform.
The up side to a 401k is that if the market does well and the funds you chose do well you can have dramatic increases in your invested funds.
The down side to a 401k is that if the market does not do well, or if the funds you chose do not do well ten you can have a dramatic decrease in the funds you saved for retirement.

In most school districts across the state of Utah your district will contribute to the 401k for you (usually 1.5% of your salary every year). The amount the district funds is NOT A MATCH to what you deposit. In fact every district I have spoke with will deposit the same amount -not a penny more not a penny less- regardless of what you contribute.

To view how your URS is doing you can contact them directly, receive regular statements, or look at the last years results online. (

Is funding the URS sponsored 401k your best option for retirement? Not for most. Why? If you stop teaching / working with a school in the state, then your funds sit and wait. If you move to another state your UT account sits. You have the option to 'roll' the funds to your new district- and I strongly encourage you do- but if you do not request it the funds will just sit. If you choose to change careers you can no longer contribute to your URS account either.

For advice consult the Utah Pension Experts (