Today's financial tip is be sure and read the fine print. I'm sure you've probably heard that tip before, but let me give you a real life example, a real life story, almost a horror story of why you need to read the fine print.
I was meeting with some folks that were teachers, and they had what was called a 403b. A 403b is just like a 401K, but typically for nonprofits like schools or state or government body institutions. It's a retirement account, and they just had a change in the 403b regulations a couple years or so ago, so a lot of people have been doing a lot of transferring of their 403bs. This couple had met with an insurance agent, and they were going to transfer their existing 403b into a new one with him.
The insurance agent had told them that they had to do it, it was a requirement, which was not the truth. They could have left it where it was, but that is beside the point. They had transferred over into this new 403B before reading the fine print. Did I mention that the new 403b was an annuity product? That's where the story gets going…..
It's just 10 years
The worst part about this story, what makes it a horror story was that the client was about three or four years away from retirement. What's so bad about that? Here's the thing:
The new annuity contract that they had had a 10-year contract period attached to it.
So if they were to cash out early or liquidate early or take any funds out, they would have to pay a surrender charge to get access to their funds. They had 10 years before they could access any of that money penalty free.
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With them approaching retirement, because their goal was to retire at 60, they knew they were going to have to start touching that here in about four years or so. There was no way of getting around having to pay this penalty. Had they read the fine print they would have seen that there was a 10-year contract and known to not do this. They trusted the advisor and unfortunately this was an advisor not to be trusted.
When it comes to doing any major purchase or making any changes in your investments make sure you read the fine print. Make sure you read it and make sure you know what you're getting yourself into because it could save you a bundle.
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