Why are 403(b) plans trapped in the annuities loop?

[Guest Lyric]

Is there any way to get away from annuities as the preferred investment product of 403(B) plans? No serious investor regards annuities as an efficient investment product given everything else that's on the market today.

I'm working in the nonprofit sector and will be contributing to a 403(B) plan.

(1) Can I opt for mutual funds of my own choice at the outset, or do I have to go with my employer's existing choices?

(2) As I don't have an account yet, can I bypass my employer's broker and set up my own account?

Lyric

[Guest CVCalhoun]

You can't really get away from your employer's choice of product for the initial investment, although if the annuity has at least some penalty-free withdrawals allowed, you may be able to transfer that money to a mutual fund of your choice. Another alternative would be to speak to your employer about allowing a broader range of investment choices.

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Employee benefits legal resource site

[jlf]

TSAs are trapped in the annuities loop because annuities were the only investment option from 1959-1974. The custodial account option (403(B)(7)) is the new boy on the block.

[Guest Lyric]

Thank you for your responses. I shall check out the options my employer provides and take this up with them if necessary.