retirement surrender fees...wow!! and HELP!
Looking over my girlfriend's finances, I see that she is invested in ultra-safe-but-low earning investments in her retirement fund... it's a steady 3%!!! yuck.
So, I called her investment company and asked if there were any surrender fees given that she has had this investment since 1997.
They said "yes... and we decrease the fee 1.5% for every year that she has been with us. So, since this is her tenth year she would only have to pay 10%."
Holly cow! What a racket! She's a school teacher that does a stellar job with her students, but she is financially naive. To be more accurate, I should say that she simply doesn't care much about money (or cars or jewerly or other stuff)... she was simply told by her employer that it was "good" to invest for retirement and she complied with the first saleman that nabbed her.
The school system allows these racketeers to hang out in the teacher's lounge and, when teacher's pass by, these guys jump on them. Schools should screen for this kind of BS!
I want to get her moved into Vanguard, but I don't know if it's worth the 10% damage!
Vanguard money market funds easily pay 4.9 to 5%+ in interest. My plan would be to dump her money into that and then trickle funds from the money market into a balanced stock index fund within Vanguard.
DANG! I do NOT want to give her old investment company the satisfaction of earning the thousands in surrender fees! I'm hoping there is way to cut that fee back a bit.
Here we have a truly driven, high performance teacher that has been subjected to a retirement scam by her own employer...which only adds insult to her already low retirement prospects. If you knew her, you'd understand why I'm upset.
Can they really get away with it?.. and
Do you think it's advisable to take the 10% beating and move over to Vanguard?
We're talking about a 403b here.
Thanks for any advice!