RedBullSugarFree
First Time Poster
Cash: $ 0.25
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Joined: 12 Nov 2014
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| Mutual Funds - Teacher |
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I started my first teaching job this school year. During my third week a rep. from VALIC visited and discussed setting up a mutual fund. It's sad but I don't know the terms and don't see that information on any of the paperwork. All I know is that I signed up for $30 per paycheck to invest in a mutual fund which is currently performing at -.26%.
Last evening a rep. from First Investors talked for 3 hours straight about them vs VALIC. Then wanted us to take out an Accident and Disability Insurance policy. Which we almost did, but my spouse said we would think about it first. I personally don't think this insurance is worth the money, plus, I don't like that it was offered to us in such a direct way. But I guess that is his job.
More importantly, he talked us into moving our measily $30 to a new mutual fund. His selling points were visual, of course, and showed us what VALIC does vs what First Investors would do. In short, VALIC goes through an annuity and then mutual fund and when we take it out it gets annualized (I don't remember the term) and goes back to VALIC then we might be able to get it unless someone dies. That is what I understood. First Investors will buy the mutual fund at something about 5.7% and it would be much better for us.
That is what I got from the conversation and I hope someone can help me understand the position of the financial advisor and help me understand what I should be doing with this $30 and where does it go and why is VALIC saying one thing and First Investors is saying another, etc.
Please help.
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Wed Nov 12, 2014 1:30 pm |
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oldguy
Senior Member
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Joined: 21 May 2006
Location: arizona
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There are some very basic rules for a young person to learn:
1. Don't allow things to be "sold" to you - "buy" only things that you find yourself. This is especially important when life insurance, car insurance, investments, cars, are involved. Eg, if YOU wanted life insurance you would seek out a company online, compare, and buy. That is the opposite of someone else wanting to SELL you insurance.
2. Never mix insurance and investing, you'll get the worst of both. (Good catch by your spouse)
3. Never buy 'whole' life, 'return of premiums', yada - get 'term' insurance only. Never buy annuities, they are appropriate for only a very small group - and they are over-sold cuz of the big commissions/fees.
4. Do not be sold mutual funds, penny stocks, etc - go to one of the Big 3 no-load stock companies and select what YOU want - the companies are Fidelity, Vanguard, TR Price.
5. The "advisor" was a sales rep, not an actual advisor - there's nothing wrong with that, just be aware of it.
I've noticed over the years that teachers are given poor (terrible?) financial advice. Administrators (not particularly savy themselves) pass the buck to outside providers and call in all kinds of 'presenters'. These turn out to be high fee, low return (sometimes annuity based) products. They are sold cuz they are 'safe' - and teachers, cuz of their low pay, need to be conservative. It turns out that the opposite is true - teachers have a steady longterm uninterrupted income stream, that trumps high pay interrupted by strikes, layoffs, etc. Eg, $5000/yr, placed in the SP500 Index for 30 yrs at 11%/yr, is $1,100,000. Most teachers can invest the $5000/yr, a teaching-couple can handle $10k/yr and end up with $2M at age 55 - yet conventional wisdom tells you the opposite - lots of drivel about 'we don't teach for the money', it's for the children, yada. Well, you can have both. 
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Wed Nov 12, 2014 3:41 pm |
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blixet
Preferred Member
Cash: $ 32.55
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Joined: 28 Apr 2013
Location: Southern California
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| Re: Mutual Funds - Teacher |
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quote:
Originally posted by RedBullSugarFree
I started my first teaching job this school year.
Congratulations on your first teaching job. What is it that you teach?
And if I may ask, what state are you in? The reason I ask is that you may have access to a 403b plan through your State Teachers retirement system that would be favorable to you.
Unfortunately, teachers are regularly targeted by financial salespeople who aggressively prospect for customers. Unless you are prepared, there is an inherent asymmetry of knowledge that will be exploited.
Information is more valuable sold than used – Fischer Black
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Wed Nov 12, 2014 8:43 pm |
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Wino
Senior Member
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Joined: 03 Aug 2012
Location: Dubai
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Long term disability is possibly a decent insurance to get - in fact, it is a good thing to purchase - however, I don't like the "accident" rider this guy is selling. That's a gimmick policy, and because he's offering that, I question his motives and other suggestions.
I'd do some comparison shopping for disability insurance. Never, ever, ever use someone who sells insurance to invest. Unless your net worth is over $5 Million, or you have no other investment opportunities, then you don't need an annuity.
Basically, what oldguy said above, but in spades. I'd be very wary of this character, but it is possible he's on the legit side. You'll know once you start getting comparative quotes. You need to pay a little to have a personal representative, as opposed to internet-based insurance, but nowhere near 100% more. If you find his quote is 10% more than an anonymous quote, and you ONLY do the long-term disability (and term life), then I don't see a problem. If, on the other hand, his prices are high, or he keeps pushing the short-term disability, accident coverage, or (worse, red flag) whole life, universal life, or anything other than "XX years of level term life insurance," then I'd drop him and go elsewhere.
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Thu Nov 13, 2014 6:12 am |
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GardenCat
Full Member
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Joined: 07 Dec 2014
Location: Colorado
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Hello at this later date.
1. you can probably stop the current $30/month wherever it is going that you are not so sure about... You can very likely do something better, such as:
2. You probably DO have a retirement plan available for you both, either a state plan or a 403b or 457 plan. Use that when you can, put away some amount automatically with each pay period and put the $ into something that broadly matches the S+P500.
3. "Accident" insurance is usually so very specific that it will never be useable, i.e., one hand and one foot lost or some such thing.
Disability Ins from a reputable company is the way to go
4. If you qualify, begin to put some money into a Roth IRA, again on a regular monthly basis. Vanguard, TR Price, Fidelity are the three palyers in this realm with low fees and a myriad of funds to choose from.
You have a long time to let your savings grow, time is your big friend!
Good luck 
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Mon Dec 08, 2014 12:06 am |
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Wino
Senior Member
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Location: Dubai
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quote:
Originally posted by GardenCat
If you qualify, begin to put some money into a Roth IRA, again on a regular monthly basis.
I must disagree. If the OP has the money, he should invest the maximum on January 1. Historically, the market trends upward, and dollar-cost-averaging for DCA's sake is usually a losing proposition over all. You may do better one year out of 5 DCA, but immediate investment is the winner at least 3/4 of the time.
I'm just picking nits, I know, but I prefer to say, "Put money into your Roth IRA regularly," which allows for monthly investing, or (if you can afford the lump sum) annually investing. The annual payments themselves are dollar cost averaging, forced by the way the government structures the plan.
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Mon Dec 08, 2014 5:33 am |
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GardenCat
Full Member
Cash: $ 12.80
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Location: Colorado
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OK, regularly in general may be better...
However, for someone newly into this, and a new teacher (likely underpaid?), a small monthly investment will work just fine, and for an automatic investment into an IRA or a Roth the big three will accept $50/month..
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Tue Dec 09, 2014 3:19 am |
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