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Like It Or Not, Annuities Are Coming To Retirement Plans
Bah! The webape at wifey's 403b is utterly useless. It's MassMutual, administering the 403b for employees who work at the BIG hospital in these parts. (Baystate. They have taken all the steps they can in order to make us prisoners of their system.) Not to mention that the insurance plan offered is ALMOST insurance. Anyhow, one positive item is the employer match at 50% (up to 4% of income sent to 403b) and the annual bigger "dump" of money which happens always in the Spring, into the account. But when did it happen? How much was "dumped?" The stupid webpage only gives you totals for the lifetime of the account. And oh, yes: I have learned that my wife can, if she wants, annuitize the total, when the time comes.
People lament the disappearance of traditional pensions, but when they're offered the opportunity for their retirement plan to give them those pension payments for life, they'd rather take the money and run.
Traditional pensions have value. Annuitize and you've got a traditional pension. The problems are not with the idea of annuities, the problems are with some (most) of the annuity products.
The IN column is an editorial. That said, it does make some fair observations:
We are all familiar with the horror stories tied to annuity products. Over the years, annuities, which come in multiple stripes and flavors, have been derided for high fees and commissions, questionable returns and mind-numbing complexity.
...let's be clear that not all annuities are overly complex and expensive; some are more closely aligned to straight insurance for old-age income.
In other words, some look like straight pensions.
What Crash is describing is all too common. That's a problem with the plan, not the concept. Government 403(b) plans are exempt from ERISA fiduciary requirements (though they may still be subject to state level trust laws). That's a good part of why many 403(b) plans are so confusing. It wasn't until just a decade ago that 403(b)s were even required to provide plan documents. The new legislation targets 401(k) plans, that are already better regulated.
The column, being an editorial, has its fair share of biased information. "[The proposal] has bipartisan support, and proponents range from the Insured Retirement Institute to AARP."
Well sure. The Insured Retirement Institute is a trade organization representing insurers, brokers, advisors, "solution providers", ... AARP started as a promoter of insurance for retirees and still makes money branding insurance products. The fact that legislation opening 401(k)s to annuities is supported by organizations standing to benefit from it is not exactly a reason to celebrate. (Though since the support is to be expected, it's not a big negative, either.)
Ok, that's reasonable... But when you die, you die. No more annuity, right? My traditional pension is on the endangered species list, I know. Not many still around. But under the arrangement, wifey will get 50% of what I'm getting already, at time of death, which will surely be more than the check is right now, each month. We seem to get a tiny raise, each and every year. I could have elected a different option that would offer me/us less right now, but insure that she'd get more after my demise, too. And speaking of retirement, my classmate, a Cath. priest, not long ago informed me of a fact that kinda shocked me: under Canon Law, they are prohibited from investing in the stock market AT ALL, when it comes to arranging a plan for the priests for their retirement. And with interest rates still very low, looks like a losing battle. Holy cow. Red Sox are 8-1 to begin 2018. Best beginning EVER for those bums!
@Crash Check item 9, in this list. The returns sure are not money market rates for the years indicated; ALSO I do believe the return data is misplaced in the form.......the 2011 return is not likely correct and could be the 1.67% amount show in the adjacent year. 2011, from my recall; was about 1.7% (the year of the downgrade for U.S. credit worthiness). The negative amount for 2009 is likely a 2008 number, also misplaced in the list. Correction of my statement: The fiscal year periods being June of each year would likely indicate proper returns status percentages.....my bad. Oh, well; just a few trinkets of stuff. I assume your notation is that a priest can not invest in the market place or do you mean a Catholic pension fund.
Annuities have all sorts of payout options, including various payouts to a survivor (e.g. spouse). When both die, the annuity "dies" with them.
Here's Investopedia's page on joint and survivor annuities. "With a joint and survivor annuity, monthly payments are typically reduced by one-third or one-half for the surviving annuitant."
Annuity payout options certainly can include annual adjustments ("a tiny raise, each and every year"). Really, vanilla annuities are very much like traditional pensions. It's when you start adding bells and whistles that their prospectuses get to be 200-300 pages long and you've no idea anymore what you're getting or how much it's costing you. KISS.
Regarding Catholic priests and investments, it may be more complicated than that. As an outsider, the first thought that came to mind was: if priests take a vow of poverty, how do they have the money to invest? And if they don't take that vow, why can't they invest in something like Ave Maria funds?
A quick search came up with an interesting site: cannonlawmadeeasy.com. It was founded by "an American canon lawyer who practices and teaches in Rome ... to provide clear answers to canonical questions asked by ordinary Catholics without employing all the mysterious legalise that canon lawyers all know and love." Note that the pages cite to Canons (in English) on the Vatican website.
Many Catholics and non-Catholics alike erroneously believe that all Catholic priests are obliged to live in poverty, but in fact this is not the case. Some clergy have made vows of poverty, while others have not. ... Priests who have not vowed poverty may also freely choose to invest their income as they see fit, and so they may lawfully own stocks or shares in mutual funds.
Each faith seems to come up with practical ways around what appear to be absolute rules. For example, Muslims live with riba, a prohibition against charging interest on loans. Yet through legal fictions, you've got Amana funds and Sukuk (a form of lending where the lender takes an equity interest).
I'm way out of my depth here, so please correct as appropriate.
@Crash Check item 9, in this list. The returns sure are not money market rates for the years indicated; ALSO I do believe the return data is misplaced in the form.......the 2011 return is not likely correct and could be the 1.67% amount show in the adjacent year. 2011, from my recall; was about 1.7% (the year of the downgrade for U.S. credit worthiness). The negative amount for 2009 is likely a 2008 number, also misplaced in the list. Oh, well; just a few trinkets of stuff. I assume your notation is that a priest can not invest in the market place or do you mean a Catholic pension fund.
Hey, Catch. Any priest as an individual could invest in the market. My note was about any official entity--- like all the priests in a particular diocese, planning as a group. Such an entity cannot by Canon Law put their retirement money at risk.... Oops, but WAIT! There's more:
It appears that my priest-friend is incorrect (!!!) Yet he distinctly and explicitly told me what I had just shared above, in this thread. Of course, Canon Law applies worldwide. There is a big chunk of it which must be interpreted in order to be applied in a way that doesn't screw people, for it to be applied meaningfully. As a seminarian and a former Catholic myself, my bishop once asked me if I'd be willing to study Canon Law. He needed a canon lawyer. The guy they had was retiring. I told the bishop I'd rather stick needles in my eyes.
But clearly, the Detroit Archdiocese is invested in the market on behalf of their priests. My classmate is in Canada. And the entire diocese (Nelson) has just 27 priests, and only 3 are from either Canada or the USA! I'm intimately familiar with the geography up there. "... Investments of Plan funds grow in years when the markets perform well. The Plan fund is reduced when the market declines..."
Annuities have all sorts of payout options, including various payouts to a survivor (e.g. spouse). When both die, the annuity "dies" with them.
Here's Investopedia's page on joint and survivor annuities. "With a joint and survivor annuity, monthly payments are typically reduced by one-third or one-half for the surviving annuitant."
Annuity payout options certainly can include annual adjustments ("a tiny raise, each and every year"). Really, vanilla annuities are very much like traditional pensions. It's when you start adding bells and whistles that their prospectuses get to be 200-300 pages long and you've no idea anymore what you're getting or how much it's costing you. KISS.
Regarding Catholic priests and investments, it may be more complicated than that. As an outsider, the first thought that came to mind was: if priests take a vow of poverty, how do they have the money to invest? And if they don't take that vow, why can't they invest in something like Ave Maria funds?
A quick search came up with an interesting site: cannonlawmadeeasy.com. It was founded by "an American canon lawyer who practices and teaches in Rome ... to provide clear answers to canonical questions asked by ordinary Catholics without employing all the mysterious legalise that canon lawyers all know and love." Note that the pages cite to Canons (in English) on the Vatican website.
Many Catholics and non-Catholics alike erroneously believe that all Catholic priests are obliged to live in poverty, but in fact this is not the case. Some clergy have made vows of poverty, while others have not. ... Priests who have not vowed poverty may also freely choose to invest their income as they see fit, and so they may lawfully own stocks or shares in mutual funds.
Each faith seems to come up with practical ways around what appear to be absolute rules. For example, Muslims live with riba, a prohibition against charging interest on loans. Yet through legal fictions, you've got Amana funds and Sukuk (a form of lending where the lender takes an equity interest).
I'm way out of my depth here, so please correct as appropriate.
Hey, @msf. Thanks for the new information. No, it's clear that you're NOT wrong. Which makes me wonder how my classmate could make that assertion--- that retirement plans for entities representing priests are prohibited from investing in the market. I'll be out there for a visit in late May. Gotta remember to ask him a question or two about it! (And he's in the old boys group, one of the veterans out there. Ordained in 1987.)
Comments
Traditional pensions have value. Annuitize and you've got a traditional pension. The problems are not with the idea of annuities, the problems are with some (most) of the annuity products.
The IN column is an editorial. That said, it does make some fair observations: In other words, some look like straight pensions.
What Crash is describing is all too common. That's a problem with the plan, not the concept. Government 403(b) plans are exempt from ERISA fiduciary requirements (though they may still be subject to state level trust laws). That's a good part of why many 403(b) plans are so confusing. It wasn't until just a decade ago that 403(b)s were even required to provide plan documents. The new legislation targets 401(k) plans, that are already better regulated.
The column, being an editorial, has its fair share of biased information. "[The proposal] has bipartisan support, and proponents range from the Insured Retirement Institute to AARP."
Well sure. The Insured Retirement Institute is a trade organization representing insurers, brokers, advisors, "solution providers", ... AARP started as a promoter of insurance for retirees and still makes money branding insurance products. The fact that legislation opening 401(k)s to annuities is supported by organizations standing to benefit from it is not exactly a reason to celebrate. (Though since the support is to be expected, it's not a big negative, either.)
Check item 9, in this list.
The returns sure are not money market rates for the years indicated; ALSO I do believe the return data is misplaced in the form.......the 2011 return is not likely correct and could be the 1.67% amount show in the adjacent year. 2011, from my recall; was about 1.7% (the year of the downgrade for U.S. credit worthiness). The negative amount for 2009 is likely a 2008 number, also misplaced in the list. Correction of my statement: The fiscal year periods being June of each year would likely indicate proper returns status percentages.....my bad.
Oh, well; just a few trinkets of stuff.
I assume your notation is that a priest can not invest in the market place or do you mean a Catholic pension fund.
http://www.aod.org/our-archdiocese/archbishop-allen-vigneron/sharing-the-light-communications/priests-pension-plan/faq-about-priests-pension-plan/
Here's Investopedia's page on joint and survivor annuities. "With a joint and survivor annuity, monthly payments are typically reduced by one-third or one-half for the surviving annuitant."
Annuity payout options certainly can include annual adjustments ("a tiny raise, each and every year"). Really, vanilla annuities are very much like traditional pensions. It's when you start adding bells and whistles that their prospectuses get to be 200-300 pages long and you've no idea anymore what you're getting or how much it's costing you. KISS.
Regarding Catholic priests and investments, it may be more complicated than that. As an outsider, the first thought that came to mind was: if priests take a vow of poverty, how do they have the money to invest? And if they don't take that vow, why can't they invest in something like Ave Maria funds?
A quick search came up with an interesting site: cannonlawmadeeasy.com. It was founded by "an American canon lawyer who practices and teaches in Rome ... to provide clear answers to canonical questions asked by ordinary Catholics without employing all the mysterious legalise that canon lawyers all know and love." Note that the pages cite to Canons (in English) on the Vatican website.
From its page on The Priesthood and the Vow of Poverty: Each faith seems to come up with practical ways around what appear to be absolute rules. For example, Muslims live with riba, a prohibition against charging interest on loans. Yet through legal fictions, you've got Amana funds and Sukuk (a form of lending where the lender takes an equity interest).
I'm way out of my depth here, so please correct as appropriate.
It appears that my priest-friend is incorrect (!!!) Yet he distinctly and explicitly told me what I had just shared above, in this thread. Of course, Canon Law applies worldwide. There is a big chunk of it which must be interpreted in order to be applied in a way that doesn't screw people, for it to be applied meaningfully. As a seminarian and a former Catholic myself, my bishop once asked me if I'd be willing to study Canon Law. He needed a canon lawyer. The guy they had was retiring. I told the bishop I'd rather stick needles in my eyes.
But clearly, the Detroit Archdiocese is invested in the market on behalf of their priests. My classmate is in Canada. And the entire diocese (Nelson) has just 27 priests, and only 3 are from either Canada or the USA! I'm intimately familiar with the geography up there.
"... Investments of Plan funds grow in years when the markets perform well. The Plan fund is reduced when the market declines..."