Bibliography

Merits Of Using A Deferred Annuity To Fund An IRA,

401(k), 403(b) Or Other Tax Qualified Retirement Plan

 

Table 1 (independent views)  Part 1  Part 2  Part 3  Part 4  Part 5  Part 6

Table 2 (annuity industry views) - Part 1  Part 2

 

 

Table 1, Part 5

(independent views)

 

 

 

 

Citation

Summary Excerpt

100

The Overselling Of Annuities,” Kiplinger’s Online, December 1998

“`I have unfortunately seen many retirees put too much of their assets in an annuity where they were totally inappropriate, where the tax savings just weren’t required,’ says Gary Schatsky, a fee-only financial planner and attorney from New York City. Schatsky concedes that variable annuities may be appropriate for some people, mainly those who have maxed out their retirement contributions at work and in an IRA, and who are also subject to a very high tax rate. But that's a small number of people.”

 

99

Jersey Gilbert, James R. Hagy and Christopher Oster, “Investing For Retirement,” SmartMoney, December 1998 at 105

The article tells the story of Joe Daniel, who was sold a deferred annuity for his 401(k) rollover. “`I figured, how bad could they screw you?’ he recalls. `Turns out they can screw you pretty bad.’”

 

“Daniel became ensnared in what is perhaps the most common pitfall in retirement investing - a tax-deferred product inside a tax-deferred account.”

 

“`It’s nuts to roll a qualified distribution into (a variable) annuity,’ says Miami certified financial planner Frank Armstrong. What’s so nuts about it? Variable annuities are themselves tax-deferred investments. In other words, Daniel was paying for an extra layer of tax protection he did not need.”

 

“Why do so many investors overlook all the drawbacks and get sucked into variable annuities? Largely because brokers, who get outsize commissions for selling variable annuities, are pushing them harder than ever. Ordinarily an annuity sale earns a commission of 5 to 7 percent, or about twice what a brokerage gets for selling a mutual fund with a sales charge.”

 

98

“Which Fund Types Are Right For You?, USA Today, November 13, 1998 at 3B

“But some advisers actually tell clients to take money from individual retirement accounts and roll them into variable annuities, even though both are tax-deferred. . . . ‘[I]n the vast majority of cases the annuity offers the highest commission,’ says Mark Maddox, former Indiana securities commissioner, now a lawyer with Maddox Keoller Hargett & Caruso.”

 

97

Humberto Cruz, “Agent’s Advise On IRA Only Half Of The Story,” Sun-Sentinel (Fort Lauderdale, FL), November 9, 1998 at 22

A “letter that makes my blood boil.” A reader writes that an insurance agent is recommending a Roth IRA, funded by what appears to be deferred annuity. The columnist deduces that the insurance agent is “suggesting placing an annuity inside an IRA, a questionable arrangement in the minds of many financial planners.”

 

In addition, the insurance agent is taking advantage of the fact that many people “don’t know that an IRA, whether tradition or Roth, is NOT a particular type of investment. It is simply a way of registering an account, regardless of how the money is invested.”

 

96

Sandra Block, “Variable Annuities Are Hot - But Don’t Get Burned,” USA Today, October 26, 1998

“Unfortunately, variable annuities also are popular with unscrupulous financial advisers. . . [who] steer clients looking for simple mutual fund investments into variable annuities instead because of the fat commissions they generate. . . . Few financial products are as lucrative as variable annuities.”

 

The experience of a 53-year old cardiologist is illustrative. “It was four years ago that Allan Garfield went to a financial planner to discuss what to do about a $200,000 individual retirement account with mediocre performance. That’s when she suggested he roll the money into a variable annuity. Garfield took her advice but regrets it. He says he didn’t realize until after he signed the contract that he didn’t need a tax-deferred product because his IRA was tax-deferred.”

 

95

John Tompkins, coiningmoney.com, October 19, 1998

“Investors who fail to get objective advice about a complex product like VAs are capable of making all kinds of mistakes.  One such is buying variable annuities and then putting them in a Roth IRA.  Since both the annuities and the IRA are tax advantaged, it’s a pretty dumb move, but fairly common.  Most financial planners advise not even considering a variable annuity until you have maxed out your IRA and 401(k) plans.”

 

“The recent sale of SunAmerica Inc. one of the largest VA companies, to a major insurance company, tells Wall Street that the popularity of variable may well have peaked.  The CEO of SunAmerica is Eli Broad, who has a remarkable track record for selling his investments at precisely the right time.”

 

94

Scott Burns, “403(b) Plans Can Prove Costly,” Dallas Morning News, October 6, 1998 at 1D

“If a worker in a large, low-cost 401(k) plan invests 10 percent of his income, a worker in a 403(b) plan dominated by higher-cost variable annuities would have to save 13 percent of income over 40 years to accumulate the same amount of money as the 401(k) plan worker.”

 

93

Harris Collingwood and Janice Koch, “Your 401(k) Is Costing You Too Much,” Worth Magazine, October 1998 at 74

“Consider the plight of one small Florida-based technology company. . . the plan’s assets were invested not in conventional mutual funds but in variable annuities -- essentially, mutual funds with an extra layer of fees that add 100 to 125 basis points to each fund’s expense ratio. In addition, the employees paid record-keeping fees, an annual administrative charge of $35 per participant, and a 1 percent annual contract fee levied in perpetuity simply for the privilege of doing business with the plan provider. Of course, the Florida firm could have exited this expensive arrangement at any time - as long as it paid a 5 percent surrender charge. But the worst part of the whole mess is that this is, as [Ted] Benna [the Pennsylvania benefits consultant who invented the 401(k) in 1980] says, `a common, everyday kind of situation.’”

 

92

Humberto Cruz, “Tax Sheltered Annuity Fees Seems Excessive,” Rocky Mountain News (Denver, Co.), September 21, 1998 at 17B

The columnist finds 403(b) plan annuity insurance features to be “useless, yet annuities charge for them even if you never intend to use them.”

 

“If I wanted to leave money to a beneficiary I would buy a life insurance policy, which, unlike an annuity, passes on the death benefit free of income taxes.”

91

Tom Shean, “The Annuity Question; Part Mutual Fund, Part Insurance Policy, It’s Not The Answer For Everyone," The Virginia-Pilot (Norfolk, VA), September 13, 1998 at D1

“Do not use an annuity for investments in an IRA or a 401(k). It’s redundant to put a tax-deferred product inside a tax-deferred retirement plan.”

90

“Investment Mailbag,” The Record (Bergen County, NJ), September 13, 1998 at B4

A reader writes that her insurance company wants a surrender penalty to cash in her fixed annuity invested in her IRA -- the insurer told her the penalty is a “finance charge” -- even though she will soon be required by the tax law to take mandatory withdrawals from her IRA.

 

“Your IRA rollover was placed into a fixed annuity. One of the chief advantages of an annuity, fixed or variable is tax-deferred income. However, you were already enjoying tax deferral within your IRA. Why duplicate this? It was, at best, a very dubious strategy for you.”

 

89

Paul J. Lim, “AIG’s Proposed Acquisition of SunAmerica; As Boomers Retire, Annuity Business Outlook Sunny,” Los Angeles Times, August 21, 1998 at D1

“Ironically, annuity sales have been helped by the popularity of the new Roth IRAs. Even though IRAs are themselves tax-deferred accounts, some life insurance companies continue to market variable annuities as appropriate investments to put into an IRA -- even though most financial planners say there’s no logic to such a `double umbrella.’”

88

Paul J. Lim, “Market Savvy Variable Annuity Sales Alive and Well in 2nd Quarter, Despite Predictions of Their Demise,” Los Angeles Times, August 11, 1998 at D4

“Insurance companies have also been marketing variable annuities as a way for individuals to fund their Roth IRAs and other `qualified’ retirement plans--against the best advice of a number of financial planners.

 

Critics note, for instance, that investments placed in IRAs don't need to be tax-deferred since the accounts themselves are tax-deferred.

 

`When you go out in the rain, do you need two umbrellas?’ asks Ellen Rinaldi, head of variable annuity sales for the Vanguard Group in Valley Forge, Pa. `Of course not. So why do you need to put a variable annuity in an IRA ? You don't.’

 

Nonetheless, half of all annuity sales are going to investors who seem to want these "two umbrellas," thank you very much--and the industry is only too happy to oblige.”

 

87

“Some Investors Place Annuities Inside Roths,” Investor’s Business Daily, July 31, 1998 at B2

“Some investors are taking a puzzling step with Roth IRAs: They’re stuffing variable annuities into these new retirement vehicles. Because both offer tax advantages, packing one inside the other is an essentially redundant, and expensive, move.”

 

“[C]ommissions, often generous, are what make annuities so popular with non-fee-only financial planners.”

 

86

“Growth Of Annuity Market Says Little About Investor Satisfaction,” Securities Week, July 27, 1998 at 5

“According to [Mark] Maddox [a partner with Maddox, Koeller Hargett & Caruso] the most `shocking’ fact in the rise of annuity sales, also a sign of uneducated consumers, is the number of annuities that have been placed into IRAs. Of the $110.8 billion [in] annuities sold in 1996, Maddox estimates that approximately $21 billion were placed into IRAs. `Putting an annuity in an IRA is useless.’”

 

“[T]he only reason a broker would do so is the high commissions. `Brokers sell what pays them best and, at least right now, what pays best are annuities.’”

 

85

David Franecki, “Caution Is Urged For Investors Considering Annuities, IRAs,” Wall Street Journal, July 20, 1998 at C1

“I don’t know anybody who would say it’s good to have a variable annuity inside a qualified plan, other than the people that sell them,” says Glenn Daily, a fee-only insurance consultant in New York. Vanguard, the mutual fund firm whose annuity fees are among the lowest in the business “won’t even sell annuities for IRAs.” Joel Dickson, a senior investment analyst and Vanguard’s Roth IRA point man says “Why would you pay extra cost to achieve extra tax deferral when you already have it?”

 

84

Robert M. Niendorf and Larry R. Lang, “Should A Salary Reduction Plan Be Funded Through A Mutual Fund Or A Variable Annuity?” Journal of Compensation and Benefits, July/August 1998 at 13

The authors are professors of finance at the College of Business Administration, University of Wisconsin, Oshkosh.

 

Their academic study “suggests that an array of mutual funds within a tax-deferred salary-reduction retirement plan will provide greater benefits for the employees than would an array of variable annuity subaccounts. “

 

In addition, “any value added by the death benefit is nil.” The “death benefit provided by the variable annuities has added little value for participants for the past 70 years.”

 

The study concludes that “[m]utual funds appear to be a superior vehicle for accumulating retirement funds within an employer-sponsored tax-deferred retirement plan as compared to a variable annuity subaccount.”

 

83

Paul Hoffman, Anthony M. Santomero, “Life Insurance Firms In The Retirement Savings Market: Is The News All Bad?,” Journal of the American Society of CLU & ChFC, July 1, 1998 at 70.

“The similarity of variable annuities to mutual funds has been a major reason for their success. But therein may lie the problem. Variable annuities tend to have higher fees than traditional mutual funds. Part of these fees go to options such as life insurance attachments and principal protection. But, as with load mutual funds, these fees will hurt long-term performance. Performance may be further affected by low risk portfolio choices. As consumers become more knowledgeable, these inhibitors may nullify the value of insurance attachments, and variable annuities may subsequently lose their luster.”

82

Helaine Olen, “Safest Strategy Is Not Always Smartest,” Los Angeles Times, June 16, 1998 at D1

Preston Caves, a fee-only certified financial planner based in Manhattan Beach, says that “having annuities in an IRA is a belt-and-suspenders approach to tax savings. That money could be put to better use[.]”

81

Brian S. Orol, “Getting A Handle On Annuities," News and Observer (Raleigh, NC), May 24, 1998 at E5

“When may annuities not be the best way to invest?. . . . When a retirement plan is sold or `wrapped’ in an annuity. Why would you put a tax-deferred vehicle such as a 401(k) or simple IRA into another tax-deferred vehicle? In other words, do you really need two umbrellas open at the same time in a rainstorm?”

 

The author is a Certified Financial Planner and a registered representative with Financial Network Investment Corp.

 

80

Harry S. Gross, “Variable Annuity Has Flaws,” Philadelphia Daily News, May 22, 1998

A reader writes that he is considering his broker’s advice to buy a variable annuity for his IRA because, according to his broker, the annuity gives you “the best mutual funds around.”

 

The columnist explains that the annuity’s primary advantage is tax-deferral, something that IRA investors already have. “Why pay the charges made by the insurance company to accomplish what you already have?”

 

79

U.S. Department of Labor, Pension and Welfare Benefits Administration, “Study Of 401(k) Plan Fees And Expenses,” April 13, 1998 

The report notes that, when 401(k) plans are funded by variable annuities, the account “then becomes an insurance product” and is exempt from the fee disclosure requirements in the securities laws.

 

Although an annuity “provides certain tax preferences. . . [t]he tax preferences do not provide any advantages to 401(k) plans since such plans already receive tax preferences.”

 

A public hearing on the adequacy of fee and expense disclosures was held at the Department of Labor on November 12, 1997. The report states that “[t]he insurance industry was underrepresented at the hearing” but anecdotal evidence was offered that some insurance companies would object to any rule that would require them to disclose sales charges or mortality insurance charges to 401(k) plan sponsors or participants.

 

78

Tad Leahy, “The 401(k) Triple Threat,” Controller Magazine, April 1998 at 21

“"High-priced 401(k) plans are a lawsuit waiting to happen," says Dan Maul, president of Retirement Planning Associates in Kirkland, Wash., which advises plan sponsors.”

 

“The biggest examples of 401(k) fee abuses are unregistered group annuities, according to Maul. `They're not subject to the same rules as mainstream investment choices because they don't require a registered securities rep to sell them,’ says Maul.”

 

77

Aldo Svaldi, “Pensions Warned On Annuity Holdings: Experts Say Variable Offerings May Diminish Investment Returns For Popular 401(k)s,” Denver Business Journal, March 23, 1998

“`There is no viable argument for having a variable annuity in a qualified plan. There is no tax justification,’ said Mark Gutrich, a retirement plan consultant with Creekside Consulting in Englewood.”

 

“[Gutrich] argues employers using variable annuities could breach their fiduciary duties to employees. That in turn could leave them liable down the road.”

 

Gutrich, in his survey of the 401(k) market, found that many human resource managers overseeing plans don't realize they are even in variable annuities and that the costs are higher.

 

76

Dee Lee, “Money Q&A,” Boston Herald, March 8, 1998 at 32

“[I]f you are in a 403(b), make some noise about wanting mutual funds as an offering in your plan. Too often all that is available in 403(b) plans (sometimes referred to as TSA plans, for Tax Shelter Annuity) are annuities. Annuities are a poor choice for a qualified tax-deferred plan because the annuity is a tax-deferred vehicle.”

 

75

Rick Bloom, “Don't Put Variable Annuity In Retirement Account,” Detroit News, March 17, 1998 at B6

“It never makes sense to have a variable annuity within a retirement account.”

74

Liz Pulliam, “Righting The Ship,” Orange County Register, February 15, 1998 at K1

“What 401(k) investors don’t need are high-cost annuities, which are contracts sold by insurance companies[.]”

73

Carolyn T. Geer, “The Great Annuity Rip-Off,” Forbes, February 9, 1998 at 106

“If folks really knew what they were buying, how could you explain the $21 billion of annuities sold in 1996 that went into IRAs? IRAs, already tax-sheltered, benefit not a whit from the annuities’ deferral feature. . . . `This is one of the biggest disgraces in the entire securities industry,’ fumes investment adviser Joseph Ludwig of Tandem Financial Services, in Canton, Mass.

 

72

Stacy Stover, “The Hard Sell For Variable Annuities,” Kiplinger’s Personal Finance  Magazine, February 1998 at 47

“So why are variable annuities so popular? That may have more to do with the vigor with which they are sold than with how well people understand them. The key advantage of an annuity is that money earned inside the investment is tax-deferred. But confusion may be widespread. 70% of variable annuities are held in accounts that are already tax-deferred, such as 401(k) and 403(b) plans, according to LIMRA International, a financial-services research firm. This redundancy simply adds an extra layer of fees.”

 

71

Bridget O’Brian, “Annuity Companies Target Small Firms Seeking 401(k)s,” Wall Street Journal, January 19, 1998 at C1

“But some critics say that putting variable annuities in a 401(k) plan is giving investors a double dose of tax deferral, when one is plenty.”

 

“`I do not like VA’s at all. I think people can do much better,’ says Dee Lee, a certified planner and author of `The Idiot’s Guide to 401(k) Plans,’ published last year by MacMillan. In particular, she objects to the higher fees and extra layer of tax-deferral, which she says is unnecessary in a 401(k).”

 

70

Russ Wiles, “Be Tax-Savvy In Picking Funds For A Roth IRA,” Los Angeles Times, January 11, 1998 at D3

Alan Rosenfield, president of a Phoenix-based retirement-consulting firm called Expansion Funds of Arizona, believes that “variable annuities--near cousins to mutual funds--should not be held in Roth IRAs. Variable annuities act like traditional IRAs for those whose contributions aren't deductible, providing tax deferral rather than tax avoidance. They are more complex than regular mutual funds and generally carry higher costs. `Roth IRAs already are tax-free, so why pay the higher fees associated with annuities?’ he said. `In a Roth IRA, they're ridiculous.’"

 

69

Ken Berzof, “Get Ready For The Great IRA Rush of '98,” Gannett News Service, December 30, 1997

“Some investments aren't particularly recommended for IRAs, such as annuities and municipal bonds, which already come with certain tax breaks.”

68

Andrea Rock, “Protect Yourself From America’s Flawed Pension Plans; Blimpish Fees and Flimsy Legal Protection Cost 15% of the U.S. Work Force Billions of Dollars A Year in Lost Retirement Savings,” Money, December 1997 at 150

457 plans and 403(b)s are escaping proper scrutiny. How else to explain that plan sponsors allow these plans to be serviced largely by insurers (insurers today hold 85% of the $370 billion invested in 403(b)s and 48% of the $60 billion in 457s), who in turn limit the investment options mostly to variable annuities that harm investors with “confiscatory fees.”

 

“In reality, 75% or so of this [annuity] fee is used to pay commissions to the sales people who sell variable annuities and to boost insurers’ profits.” 

 

67

“Annuities Are Not Recommended For 401(k) Investments,” Fidelity Investments, November 5, 1997

Malcolm A. Makin, a financial adviser, writes in the “Ask The Experts” column, appearing on the Fidelity Investments web site, that variable annuities are not recommended for 401(k)s because even though they “may offer an advantage for employers in terms of the cost of administering the plan” they harm investors because an annuity “typically has a higher expense ratio, along with other fees, than a mutual fund would have.”

 

66

Ellen Schultz, “Ten Things Your Variable Annuity Seller Won’t Tell You,” SmartMoney, November 1997 at 167

“[A] third of variable-annuity sales last year were within IRAs. This begs the question: Since money in IRAs is already tax-deferred, why take on additional expenses by wrapping it in an annuity? One reason, claims Mark Mackey, president of the National Association for Variable Annuities, a trade group in Reston, Va., is that by doubling up, investors can `annuitize’ their savings. . . . But in truth, investors are hardly racing for that option: Fewer than 1 percent of annuity holders actually annuitize their investment in any one year, LIMRA figures show.”

 

65

Ellen E. Schultz, “Tax Advantages Of Roth IRA Top Annuities For Investors,” Wall Street Journal, October 16, 1997

“[B]eware of brokers encouraging you to use [your old IRA] money to buy an annuity that would go into the Roth [IRA]. . . `If you want a death benefit, go buy life insurance,’ says Lynn Hopewell, a financial adviser and Roth IRA expert in Fairfax, Va.”

64

Rick Bloom, Detroit News, October 6, 1997 at F5

“It makes no sense to roll your 401(k) plan into a variable annuity like Prudential Discovery. Companies charge high administrative fees on variable annuities for tax deferral. Money transferred from a 401(k) into an IRA already is tax-deferred.”

 

63

Dee Lee, “The Money Manager,” Boston Herald, October 5, 1997 at 32

“[Marc] Collier [a certified financial planner and president of Wellesley Financial Architects] observed that two of the IRAs were being held in tax-deferred annuities, an overkill, for IRAs are already tax-deferred.”

 

62

Avrum D. Lank, “Adding It Up,” Milwaukee Journal Sentinel, October 5, 1997

“I am no fan of holding annuities in IRAs because you gain nothing in regard to tax advantages. Taxes are deferred on gains made by annuities just as they are on gains in an IRA. So if you want to own an annuity, do so outside of an IRA.”

 

61

Liz Pulliam, “Annuity Is Overkill For 401(k) Rollover,” Orange County Register, October 2, 1997 at C3

A reader who is changing jobs writes that a variable annuity salesman recommended to him a rollover of his 401(k) into an IRA funded by a variable annuity because you “can choose among several mutual funds and it would only cost $30 a year.”

 

The syndicated columnist responds with an explanation that the “$30 the salesman quoted is just the annual contract charge. The real costs get skimmed off your annual returns.” She analogizes that “buying an annuity for an IRA is like buying SPF 30 sunscreen for a trip to Alaska in December. You’re paying for protection, in this case tax protection, that you don’t need.”

 

60

“Avoiding Overkill,” Kiplinger’s Personal Finance Magazine, October 1997 at 128

It is “never” a “good idea to put an annuity in an individual retirement account.”

 

“`It makes no sense to invest your IRA inside an annuity,’ says Susan Freed, a financial planner in Washington, D.C. . . . `[Y]ou’re getting killed with extra fees and not getting anything for it.’, she says.” 

 

59

Lynn Brenner, "401(k): Have It Your Way," Bloomberg Personal, October 1997 at 119

"Some 401(k)s offer annuities – mutual funds wrapped in insurance policies – which typically cost participants 100 to 150 basis points more than actively managed no-load retail funds, over and above other charges, says Stephen J. Butler, president of Pension Dynamics, in Lafayette, California. (In any case, why buy an expensive tax-deferred product like an annuity for a tax-deferred 401(k) account?)."

 

58

Brenda Buttner, “Investing In Variable Or Fixed-Income Annuities,” The Money Club, CNBC Television, October 7, 1997 at 10:40 AM

A “question that we get a lot from viewers” is whether a variable annuity is a good choice for a rollover IRA. The guest is Ginger Applegarth, a certified financial planner with Applegarth Advisory Group. She responds: “I call it the belt-and-suspenders approach because you’re getting the tax shelter of the IRA and then you’re doubling it up with the tax shelter of the annuity. And remember, you’re paying for that annuity.”

 

57

Liz Pulliam, Orange County Register, September 4, 1997 at C3

“That annuity in your IRA is, of course, the fly in the ointment. You didn’t need an annuity’s tax deferral, since that’s built into an IRA, and you lost the ability to defer withdrawal” beyond age 70 1/2.

 

56

Kevin McCormally, “Fighting For 403(b) Funds,” Kiplinger’s Personal Finance Magazine, September 1997

The article tells the stories of some employees who have tried to educate their non-profit and educational institution employers to stop arranging their 403(b)s with life insurance companies, who provide annuities with “extra fees” that “eat up” account values, instead of offering mutual fund options.

55

“Don’t Keep A Variable Annuity Inside Your IRA,” Commercial Appeal (Memphis, TN), August 31, 1997 at C3

“Generally you are paying for something that you already get for free when you buy a variable annuity in your IRA account” advises Phyllis R. Scruggs, principal and first vice president of Waddell & Associates Inc. “If the characteristics of a variable annuity are appropriate for you, then purchase it outside your IRA.”

 

54

“Money Makeover,” Boston Globe, August 25, 1997 at B6

Barry M. Freedman, chairman of Freedman Financial Associates Inc. and Marc S. Freedman, a certified financial planner and president of Freedman Financial, write that “[w]e do not recommend placing IRA assets in an annuity. It’s like placing an umbrella on top of an umbrella. An IRA already is tax-deferred.”

 

53

Carla Lazzareschi, “Money Talk,” Los Angeles Times, August 10, 1997 at D3

A reader says his financial planner is suggesting putting an annuity in an IRA and we wants a second opinion because this seems counterproductive.

 

Ms. Lazzareschi responds: “In general, our experts discourage taxpayers from engaging in the redundancy of putting tax-sheltered pension funds into a tax-sheltered investment such as an annuity. In fact, Tom Lancaster, a pension specialist with Royal Alliance in Lake Forest, says there are few reasons ever for putting pension funds into annuities.

 

Annuities are popular among many financial advisors because they generate better commissions for them. According to Lancaster, a typical investment of $500,000 in a mutual fund that charges a load will generate a sales commission of 1.5%, or $7,500. An annuity of the same amount will generate a 6% commission, or $30,000.”

 

52

Brenda Buttner, "Interview With Rick Applegate, Strategic Financial Advisors,” The Money Club, CNBC Television, July 28, 1997 at 10:42 AM

Mr. Applegate tells a viewer to terminate his variable annuity inside his IRA, even if it has “performed pretty well.”

 

“I’ve always taken the position that an IRA inside of a variable annuity is like wearing suspenders and a belt. I don’t think it’s necessary because of the additional charges you incur, M&E, mortality, etc.”

 

51

Ellen E. Schultz and Bridget O’Brian, "Annuity Buyers May Be Overdosing On Tax Deferral," Wall Street Journal, July 28, 1997 at C1

“’It’s like wearing a raincoat and carrying an umbrella indoors,’ says Rich Daniels, a broker in Albany, NY. Critics of folding variable annuities into IRAs say that for the unnecessary extra protection, investors are essentially swallowing an extra set of fees.”

 

“Certainly, for brokers who sell variable annuities, the vast expanding IRA universe is a tempting sales target, rich with potential commissions. That’s `quite an incentive for an adviser to forget about mutual funds,’ says Jason A. Dumont, a broker in Iowa City, Iowa. Variable annuities generally pay significantly higher commission than mutual funds[.]”

 

 

 

Table 1 (independent views)  Part 1  Part 2  Part 3  Part 4  Part 5  Part 6

Table 2 (annuity industry views) - Part 1  Part 2

 

 


See Part 1 for rights and permissions.

 

 

Ronald A. Uitz

Uitz & Associates

1717 K St NW Ste 600

Washington, DC 20036

202-296-5280