ScottF wrote:
- quote -


OK that's good. As long as the money is still in a Rollover IRA you can
move it to another Rollover IRA with a mutual fund company or brokerage
firm that has investment alternatives you like. If you decide the 401k's
annuity isn't exactly the "ideal" vehicle for all your retirement $,
that is (and I can't imagine why you wouldn't based on info below).

The annuity has a 9%
- quote -

It sounds like you're on the right track. Contribute to get the match,
then look to the Roth. Even if the annuity is sucking out 2% per year
the match makes up ground. It would take some really lousy subaccount
alternatives to make this all a losing proposition.

When I come across severely-limited 401k options my mindset is "where
can they do the least damage?" It can sometimes mean focusing on
something boring and low risk, because the stock mutual funds (or in
your case subaccounts) look poorly managed. Or, you choose just one
mutual fund or subaccount even though that leaves you undiversified -
because it's the best there is. And you make up the difference by
rounding out your investments in your rollover IRA, to the extent
possible. Point being it's just a different sort of decision than when
you can put the $ wherever you want.

Keep in mind also that there's another scenario here. Your employer
chose this VA for the 401k probably because it was a cheap way to set up
a 401k plan for just 4 employees. Give it a few years and between the
declining costs among 401k providers and some natural growth to the
company (and some subtle nudges by you), you might have a much-better
401k plan available to you. At that point you could shift the money to
the better alternatives. So you might find out how that would work and
whether the surrender charges would apply. Perhaps you could stop
contributions to the annuity, and annuitize it over some short-term
period, with the payments going into your new plan - I've seen that in
403bs when they added mutual funds alongside pre-existing VAs. Find out
what's possible and what the costs are.

-Tad

PS I unfortunately need to respond to one point in the other thread -
"Elle" is insinuating that I'm somehow a shill for annuities, that I
make money from them or god knows what. Totally false - please ignore
that nonsense. I'm an investment advisor & attorney, annuities aren't
really a part of what I do. Except, I guess, reviewing scenarios like
yours, where it's the only alternative, or looking at a client's
existing portfolio and saying "geez it's a shame you were sold that
annuity..."

Here is the latest on my saga. Spoke with the plan administrator on
Friday. He is an outside contractor, btw. The money is invested in a
rollover IRA currently and even though i filled out all paperwork for
annuity, he will not go ahead with enrolling me in 401k and starting
the annuity until i give him the ok to do so. The annuity has a 9%
surrender fee in first year down to 0% in year 8. Liquidity is not an
issue for me and i plan to be with this company until retirement. (The
key words being "plan to", however things are ALWAYS subject to change).
The company, as I said before, matches 4% if I contribute 5%. The
annuity company will also put in 4% of whatever myself and the company
contributes, however if you read the fine print you pay a higher fee
for this. Without the paper in front of me i think that the fee goes
up by .25%. I am planning today on finding out exactly what % is going
to be eaten up by fees each year. As far as i can tell after reading
prospectus and more importantly the contract, it looks like around 2%,
which I am thinking is not too bad, however, I am also finding it hard
to get any historical performance numbers on the funds. I will also
ask for this today. The more I look, it may not be a bad deal other
than the surrender charges. I asked admin. on Friday about a Roth
after i contribute the first 5% to 401k. I wanted to see if he would
recommend it or not. I feel that after the company match that is what
i should be doing. He agreed with my assessment which makes me feel
better about him. At least he's not just telling me to stuff as much
into the annuity as I can. Anyway, sorry so long, just wanted to
clarify some things.

Scott


--
ScottF