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Some mutual funds have a back-end sales load known as a "contingent deferred sales load" (also referred to as a "CDSC" or "CDSL"). Like a surrender charge for a variable annuity, the amount of this type of load will depend on how long the investor holds his or her shares, and it typically decreases to zero if the investor hold his or her shares long enough. The rate at which this fee will decline is disclosed in the fund's prospectus.
A redemption fee is another type of fee that some funds charge their shareholders when the shareholders redeem their shares. Although a redemption fee is deducted from redemption proceeds just like a deferred sales load, it is not considered to be a sales load. Unlike a sales load, a redemption fee is typically used to defray fund costs associated with a shareholder's redemption and is paid directly to the fund, not to a broker. The SEC generally limits redemption fees to 2%.
Note: The question of whether you must pay a penalty or other fees for switching among investment choices in your plan is completely different from whether you must pay a penalty for taking money out of your 403(b). The tax laws generally impose penalties for early withdrawals from tax-deferred retirement plans, such as 403(b) plans, IRAs, and 401(k)s. Before you take money out of your 403(b) account, be sure to consult with a tax adviser.
- What annual fees will I pay?
As you might expect, fees and expenses vary from product to product — and they can take a huge bite out of your returns. An investment with high costs must perform better than a low-cost investment in order to generate the same returns for you. Even small differences in fees can translate into large differences in returns over time.
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