Re: Is 8,25% bad?

j.lef wrote:
>
> > Opinion; ya I have an opinion. You need to check out the ins and
> > outs of the "guaranty". Remember Enron. Those employees had
> > everything in one basket; their jobs, Enron stock in the 401k plan.
> > And what did they end up with?
> >
> I should be more specific. The 8.25 percent guaranteed is an
> a 403b plan, guaranteed by the city of new york.
> There is no matching by my employer. So the money is guaranteed no
> matter what the market does.

I'm guessing that you are talking about NYC TRS TDA (or something
similar, like BERS TDA).

Guaranteed Income Contracts (GICs) in general are guaranteed by the
insurer issuing the contract. TRS is different, as you said, it is
guaranteed by the City of New York, that sponsors the plan.
(p. 5, pdf p. 7).

Whenever one talks about a GIC (or this variant), one must give not only
the current rate, but the guaranteed floor. In the case of these TDAs,
it is set by NYS constitution to be no less than 7%.
(p.2, right column).

Unless one is expecting another round of late 70's - early 80's type
inflation, that's a very attractive return. Even the 7% floor compares
well with the historical return of bonds, and you get that with less
risk.


There is a downside with the NYC TDAs in that your investment choices
are limited to this fixed income annuity and (depending on the program)
just a couple of variable annuities; also that you are limited in how
quickly you can reallocate funds (I believe it takes a year to move
funds out of the fixe income annuity).

Overall, I think that this is a good choice, and one that I would use
for the fixed income portion of my retirement savings.

--
Mark Freeland

Re: Is 8,25% bad?

>
> I'm guessing that you are talking about NYC TRS TDA (or something
> similar, like BERS TDA).

Thanks Mark for the input. Yes I am talking about the
teachers retirement system. (My spouse is a teacher). You are right about
the bottom being 7 percent, but it has just been renewed for another year
and looks like it will stay the same into the foreseable future.
I work for the city also and contribute the bulk of my
money into a 457 plan, into a portfolio of 80 percent stock,20 percent other
less risk mix. I also make voluntary extra contributions towards my
retirement at 8.25 percent interest, guaranteed to stay at that level,
which will increase my pension. I contribute a total of 7.5 percent towards
my pension. which hopefully will pay me almost two thirds my final salary
for pension.


Much regards
>
>