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Does this seem unusual?
Old 03-18-2015, 03:17 PM   #1
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Does this seem unusual?

First, let me say that I'm not a financial whiz or investor and can't believe I didn't already know this. I will retire in June and our retirement plan at my work has always been with a national company that works mostly with nonprofits. I met with the lady I have worked with over the years to go over my plan after retirement. I've always had two streams, the one that only my workplace contributed to and then the one I contributed to. Within both plans, we can move our money around in various investments (like Fidelity, Vanguard, etc.) or even keep it in the general accumulation account.

When I retire, the workplace account has to roll into a personal account. It was set up in the 1970's that this account has a general accumulation account interest rate that is guaranteed to go no lower than 3% interest in retirement. I can still move my money into mutual funds or whatever, but that option exists to leave any or all of it in a guaranteed account with 3% interest.

I went back and read all the literature and yes, there it is in writing. So is that unusual to have access to such a good rate (in these days) for a very safe option? Prior to this, my workplace plan had a guaranteed bottom of 1%, which I expected having. I still will probably move money into investments, but that is comforting to know about. Or do others have access to this rate?
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Old 03-18-2015, 03:34 PM   #2
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Once you move money out, say to a Vanguard fund, can you move it back and still get the guaranteed 3%? If so, that is a very sweet deal indeed!
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Old 03-18-2015, 03:35 PM   #3
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Yes, our only limits on moving are that you can't move it in and out of the same fund/account within 30 days. I did that once and they gave me a warning, but didn't do anything. They said I could move it to a different account, but not the same.
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Old 03-18-2015, 03:39 PM   #4
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Especially for short-term cash that is a great deal. Folks here would be all over a CD with a 3% rate and you don't even have to deal with the CD restrictions and such.

Assuming this is in a safe place, not somewhere in the Cayman Islands or something.
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Old 03-18-2015, 03:47 PM   #5
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My mega corp converted a DB plan to a cash balance plan (even thought it is still called a DB plan for some reason).... when they did that they established a rate based off of the 10 year treasury with a 4% minimum.... so yes, there are some minimums that might be established...
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Old 03-18-2015, 03:52 PM   #6
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It's Mutual of America and the specific plan with this rate is under a contract with our nonprofit that was effective in 1977, before I started working here in 1983. Mutual of A is rated from AA- to AA+.
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Old 03-18-2015, 05:55 PM   #7
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Am jealous would love an option like that.
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Old 03-19-2015, 10:35 AM   #8
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From my experience with MoA, I would be surprised if the total expenses associated with this account were less than 1.5%, and perhaps as high as 2.5%. Thus, your actual return is likely on the order of 0.5 to 1.5%. Nice in today's rate environment, but not as nice as it looks on the surface.
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Old 03-19-2015, 11:02 AM   #9
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My Cash "Pension" plan is the same and has a 4% rate. I am leaving it with my employer after retirement can count it as Fixed Income in my AA. I can't move it back in once I move it out - yours is a sweet deal !
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Old 03-19-2015, 11:15 AM   #10
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Quote:
Originally Posted by Culture View Post
From my experience with MoA, I would be surprised if the total expenses associated with this account were less than 1.5%, and perhaps as high as 2.5%. Thus, your actual return is likely on the order of 0.5 to 1.5%. Nice in today's rate environment, but not as nice as it looks on the surface.

Probably not.... my mom has an annuity with a minimum interest rate and if you calculate the earnings it matches the rate.... IOW, the growth is the 4%, not 4% less fees....
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Old 03-19-2015, 11:24 AM   #11
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Quote:
Originally Posted by Ally View Post
First, let me say that I'm not a financial whiz or investor and can't believe I didn't already know this. I will retire in June and our retirement plan at my work has always been with a national company that works mostly with nonprofits. I met with the lady I have worked with over the years to go over my plan after retirement. I've always had two streams, the one that only my workplace contributed to and then the one I contributed to. Within both plans, we can move our money around in various investments (like Fidelity, Vanguard, etc.) or even keep it in the general accumulation account.

When I retire, the workplace account has to roll into a personal account. It was set up in the 1970's that this account has a general accumulation account interest rate that is guaranteed to go no lower than 3% interest in retirement. I can still move my money into mutual funds or whatever, but that option exists to leave any or all of it in a guaranteed account with 3% interest.

I went back and read all the literature and yes, there it is in writing. So is that unusual to have access to such a good rate (in these days) for a very safe option? Prior to this, my workplace plan had a guaranteed bottom of 1%, which I expected having. I still will probably move money into investments, but that is comforting to know about. Or do others have access to this rate?
Spouse has the 3% guaranteed interest GI in her 403b with insurance co. The rate has been higher in the past, but floated down during the last decade. We've been doing some minor re-balancing in that account between the GI, S&P500, and small/mid. Definitely a nice thing to have now.
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Old 03-19-2015, 11:37 AM   #12
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Definitely check the expense provisions, but these things exist and are called "GICs" (guaranteed interest contracts). I worked for Prudential years ago and it was one of our options in the 401(k). I suppose it works for the provider because they invest the funds in a mix of fixed-income and equities and they profit when equities rise more than 3% and they have to pay out only the 3% rate.
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Old 03-19-2015, 01:13 PM   #13
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Our company pays the fees for the plan and so far, for retirees. MoA showed us that since we are members of a professional organization related to domestic violence, it cuts our fees in half as long as we are members. As individuals, as long as we will accept all electronic communications, instead of paper, we have no fee. When it used to be paper, it was $2 a month. I haven't seen any fees deducted from my individual statements, but I know the bill we get for all the current employees has a fee with it. That was what we were able to reduce a few years ago with our membership.


Our guaranteed rate was much higher in the past, too, but gradually went down to the current rate. I was told if interests rates go back up, this will, too. Fingers crossed.
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Old 03-20-2015, 05:44 AM   #14
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Pension funds in Belgium have a garantueed 3% minimum rate of return, with severe restrictions on withdrawal before 65 years old. And that garantuee is under fire with the low interest rate.

Sounds like a great deal, and unusual!
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