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 6

(independent views)

 

 

 

 

Citation

Summary Excerpt

50

Ellen E. Schultz, "For Older Investors, Allure Of Variable Annuities Belies Pitfalls," Wall Street Journal, June 30, 1997 at C1

"'Whatever you do, avoid using money in your IRA to invest in annuities,' says Jack White, whose Jack White & Co. distributes variable annuities, mutual funds and individual securities. Investments in IRAs are already tax-deferred, he observes, so it doesn't make a lot of sense to shoulder the extra fees just to have an annuity."

 

The article also quotes Craig Carnick, a financial adviser in Colorado Springs, Colo., who sees people being sold annuities for their IRAs frequently. "There isn't a snowball's chance in Hades I'd tell an older client to keep a variable annuity in an IRA.”

 

49

Avrum D. Lank, “Adding It Up,” Milwaukee Journal Sentinel, June 15, 1997

“[A]dvice to buy an annuity for [an] IRA is tarnished. An annuity is an insurance product, and as such also is tax-advantaged. Just as with an IRA, taxes are deferred on money earned in an annuity. There really is no reason to put one in an IRA, as there is no tax advantage to doing so. Beyond that, there usually are ongoing fees with annuities, and there can be restrictions on when money can be withdrawn[.]”

 

48

James M. Odato, “Your Money,” Buffalo News, June 3, 1997 at 1D

Five professional investment advisers review the financial situation of a local married couple that “got some lousy advice from someone along the way as they chose to invest their IRA money in a variable annuity.”

 

Gerald Lewandowski, a certified financial planner in Williamsville, NY comments that "I cannot understand how investment advisers who have both variable annuities and mutual funds available would ever, ever use a variable annuity for an IRA, tax sheltered annuity or 401(k) account."

 

47

Nancy Lottridge Anderson, “Avoiding The Practices Of Greedy Brokers,” Mississippi Business Journal, June 2, 1997

The author is “mad at the people in my business who sully my reputation” with unethical practices. 

 

“Little old ladies” do not need annuities because they “don’t have a tax problem” and they aren’t trying to accumulate greater wealth for retirement. 

 

“And, NEVER, EVER use an annuity for your IRA.  An IRA, by Congressional order, is tax-deferred already.  Using an annuity for an IRA is like a baldman buying a blow dryer.  It’s an accessory he doesn’t need.”

 

“And why am I seeing people with annuities who don't need them or shouldn't be in them? Well, they are, typically, high commission payers. Hmm...”

 

The author is a CFA and president of New Perspectives Inc. in Clinton, MS.

 

46

“Connecting With A Broker-Dealer,” Financial Planning, June 1997

“If regulators are getting tougher, some broker-dealers note they still aren’t asking the really tough questions. At some point, they `will start asking questions like: does a variable annuity belong in an IRA?’ notes Tom Wirtshafter, executive vice president of Nathan & Lewis in New York.”

 

45

Liz Pulliam, "Your Money: Variable Annuities Come With Expenses," Orange County Register, May 15, 1997 at C3

A reader is cautioned against accepting the recommendation of a financial adviser who recommends a SunAmerica variable annuity for a rollover IRA: “owning a variable annuity inside an IRA is an expensive belt-and-suspenders proposition, says Larry Beltramo, certified financial planner with Irvine's Regency Securities. . . .you'd already have all the tax deferral you need once you roll your 401(k) into an IRA."

 

44

Penelope Wang, “Be On Guard: Protect Yourself From The Huge, Hidden Costs Of 401(k)s,” Buffalo News, May 12, 1997 at 2C

“The huge, hidden costs of 401(k)s, which many companies conceal from plan participants even when the fees seriously erode investor returns, amount to America's biggest retirement rip-off.”

 

The article tells the story of Sue Knoebel of Redmond, Wash., who discovered that her 401(k) plan provider, Zurich Kemper Life of Long Grove, Ill., was raking off up to 2.2 percent of employee assets each year in investment management and annuity fees. "I'm no financial wizard," she says, "but I knew that fees like that are exorbitant."

 

The article also quotes Dan Maul, president of Retirement Planning Associates, an investment advisory firm in Kirkland, Wash.: "There is no way some of these insurance company 401(k)s can justify their costs."

 

“Giant insurers who hold 33 percent of small-company plan assets are the hungriest predators in this end of the market [small 401(k) plans]. Their favorite investment offering is the group variable annuity, essentially a family of tax-deferred mutual funds. Since all earnings in 401(k)s are already tax-deferred, investing your 401(k) money in an annuity seems foolish.”

 

43

Scott Burns, “Variable Annuities Make Questionable Rollover Choices,” Star Tribune (Minneapolis, MN), May 11, 1997 at 2D

The personal finance columnist writes that a variable annuity has “no earthly use” in an IRA. “When someone advises a variable annuity as a rollover option, you are being given a sales pitch, not thoughtful investment advice.”

 

42

Bill Flanagan, "Stupid Mistakes," Pittsburgh Post-Gazette, May 1, 1997 at E2

The author is a financial journalist, who quotes Carla Devlin, president of Boniface Portfolio Consulting Inc., for the following common investment "stupid mistake." "Why put a tax-sheltered investment in a tax-deferred account? If you want an annuity, put it outside of your IRA."

 

41

Brenda Buttner, "Analysis: Variable Annuities And IRAs," The Money Club, CNBC Television, April 4, 1997 7:00 PM

A consumer alert: "there's a booming business selling tax-deferred variable annuities for individual retirement accounts, funds that are already tax-deferred."

40

Rick Bloom, Detroit News, March 10, 1997 at F5

“A number of variable annuity salespeople recommend that you invest in a variable annuity within an individual retirement account. This makes no sense. All variable annuities have an element of insurance associated with them.  That insurance element allows the money to grow on a tax-deferred basis. However, if you are already within the IRA framework, you already have tax deferral and there is no reason to incur additional administrative fees in order to obtain tax deferral. 

 

It is my belief when a variable annuity salesperson recommends that you invest in a variable annuity within an IRA, all they are doing is looking for their best interest and not for yours. Thus, the smart individual will only use a variable annuity outside an IRA.”

 

39

Brenda Buttner, "Interview With Len Valletta," The Money Club, CNBC Television, March 10, 1997 7:00 PM

The “biggest mistake” purchasers of annuities make is to use them in tax qualified plans, according to the guest, a certified financial planner with Albany Financial Group. "If you're putting a variable annuity inside of an IRA, a 403(b) plan, 401(k), any type of qualified plan, you automatically get tax deferral. So you're -- it's kind of redundant because you're paying for tax deferral, and yet, you're already getting it."

 

38

Brenda Buttner, "Interview With Rick Applegate, Strategic Financial Advisors,” The Money Club, CNBC Television, February 17, 1997 10:32 AM

Rick Applegate, CEO, Strategic Financial Advisors says “I would tend not to recommend the use of a variable annuity inside of an IRA as an investment. . . . [Y]ou’re limited with a variable annuity because of those back-end charges. Therefore, I would tend to stay away from variable annuities.”

37

Andrew Tobias, "Money Angles -- Annuity Insanity?," Worth Magazine, February 1997 at 30

"What's really appalling is that a large percentage of annuities are sold to people for their retirement plans: their IRA rollovers and Keogh Plans and so on. This is nuts. Those funds are already tax-deferred. Why on earth would anyone accept the sales and administration costs of an annuity product - the only real justification for which is the tax-deferral aspect – when their funds are already sheltered from tax? If you are one of the thousands of investors making this mistake - quit it. If a financial adviser put tax-deferred annuities into your tax-deferred retirement account, I'd consider not just switching advisers but even inquiring as to possible 'remedies.' You've been the victim of something that is, or appears to me to verge on, professional malpractice."

 

36

Humberto Cruz, "Inside Business" Sun-Sentinel (Ft. Lauderdale, FL), January 9, 1997

“[P]utting a variable annuity inside an individual retirement account is a waste. In essence, annuities charge fees to qualify for the same tax-deferral that all IRAs provide. Yet, according to industry figures, about half of all variable annuities are sold as IRAs.”

 

“If your goal is to leave money to your heirs, conventional life insurance or simply a regular account invested in stocks or mutual funds makes far more sense from a tax standpoint. In any event, you would expect the value of your annuity to go up, not down, over the years.”

 

“`Under any rational scenario, the real value of the guaranteed death benefit is negligible,’' said Harold Evensky, a South Florida certified financial planner. “

 

“I agree with Gaylon E. Greer, a professor of finance at the University of Memphis, who was asked at a seminar in Palm Beach why people would want an annuity inside an IRA. `The only reason I can think of,’' he said, ``is because they met a very persuasive annuity salesman.’”

 

35

Lani Luciano, “My Broker Recommends That I Buy A Variable Annuity For My IRA? Should I Do It?,” Money, January 1997 at 141

A reader writes in that her broker recommends that she reinvest her IRA in a variable annuity, and she wonders if this is good advice. “Absolutely not. It’s absurd to put a tax-sheltered investment like a variable annuity into an IRA, which is already tax sheltered. The only person who makes out on this deal is your broker.”

 

“Variable annuities make sense only for people who have either maxed out on their tax-deferred savings accounts or don’t have any. There are two advantages to such annuities. you pay no taxes on the earnings until you take them out, and the sponsor lets you invest the money in your choice of subaccounts, which are similar to mutual funds. But it’s ridiculous to put a variable annuity in an IRA, which is already tax sheltered.”

 

34

Rick Bloom, "Rick Bloom's Strategies," Detroit News, December 20, 1996 at B3

"Recently, salesmen have begun claiming that a variable annuity is a good investment within an IRA, but do not be fooled by them. Concentrate on common sense.”

33

Todd Mason, “School Districts Have A Lot To Learn About Pension Plans,” Fort Worth Star-Telegram, November 10, 1996 at 1

For 403(b) plans, “[m]utual funds should be winning out. Teachers need to ask insurance representatives what recommends their annuities besides tradition. Introduced in 1954, annuities dress up an investment contract as an insurance policy in order to shelter earnings from income taxes. (A typical annuity has a death benefit promising to refund the original investment or pay out the annuity balance, whichever is higher.)

 

When 403(b)s came along four years later, annuities were the only game in town even though this use of an annuity represented overkill.

 

A tax shelter on its face, a 403(b) plan doesn't need an insurance wrapper to defer investment income. Investors pay for the insurance nonetheless.

 

32

Humberto Cruz, "Annuity IRA Not Very Good For Long-Term Investment," Sun-Sentinel (Ft. Lauderdale, FL), November 6, 1996 at 3D

The personal finance columnist writes to a reader who has an annuity for an IRA that "whoever sold it to you did a lousy job of explaining how it works. Either that, or it was a snow job. With an annuity for an IRA, you are paying for things you don't need."

31

Richard B. Toolson, “Which Assets Don’t Belong In An IRA,” Journal of Accountancy, November 1996 at 73

Professor Toolson writes that “Variable annuities -- essentially mutual funds with a modest insurance element -- are not appropriate for IRAs. Because of the insurance feature, earnings from variable annuities are tax deferred. While they may make sense outside of IRAs under certain circumstances (see "Tax-Advantaged Investing: Comparing Variable Annuities and Mutual Funds," JofA, May 91, pages 71-77), buying variable annuities instead of mutual funds for IRAs adds an extra layer of insurance fees in exchange for only a very modest amount of protection.”

 

30

Julie Tripp, "Variable Annuities And You," Portland Oregonian, August 5, 1996 at B10

The article reports that some of the investment portfolios that upset Suzanne Rague the most "contain inappropriately sold annuities: selling someone a high-cost annuity for their IRA, which is already tax-deferred, `is insane,' she says." Ms. Rague is a mutual fund adviser with Northwest Portfolios.

 

29

Joanmarie Kalter, "Annuities: Just Say No,” Worth Magazine, August 1996

How can you “explain the phenomenal growth in the sales of annuities? Investors poured $97 billion into these tax- deferred-savings vehicles in 1995, according to LIMRA International, a financial research association -- almost as much as the record $116 billion that flowed into domestic-equity mutual funds last year. Yet half of those sales were to people whose money was already sheltered from taxes in retirement plans, such as 401(k)s, 403b's, and IRAs. Those investors received no tax benefit from buying annuities. They also paid higher fees and, consequently, earned lower returns than if they had simply invested in a mutual fund. “

 

“`How can somebody in good conscience sell that?' asks financial planner J. Michael Martin, president of Financial Advantage in Columbia, Maryland. `The benefits don't outweigh the disadvantages,' adds David Bohannon, a financial planner in Louisville, Kentucky."

 

28

Tina Ruyter, “Sound Advice?,” PLAN SPONSOR, July/August 1996

Financial advisors are adopting creative strategies to woo 401(k) and other defined contribution plan participants, who have large rollover balances.  Mike Martin, president of Financial Advantage, a Columbia, Maryland-based financial planner, says that it’s the first time many employees have large investment balances.  One “recurring problem” is that advisors invest rollover IRAs in annuities.  “Annuities are tax-sheltered, so putting tax-exempt assets in a tax-sheltered vehicle makes no sense, [Martin] says.” 

27

Lynn Brenner, “401(k) Providers,” CFO Magazine, April 1996

Insurance agents and brokers recommend group annuities for 401(k) plans, where the added costs associated with the annuity are used to pay their sales commissions and, in some cases, a death benefit. “Two questions arise: First, why should plan participants wind up paying for an extra layer of sales commissions that, one could argue, is totally unnecessary? Second, why should they be forced to pay for product features such as a death benefit, when the core service required is investment management?”

 

ERISA mandates reasonable fees, and trying to defend an extra layer of annuity insurance fees may be a problem “in a lawsuit alleging that unreasonable high plan charges reduced investment return by millions of dollars over the years.”

 

Ms. Brenner is author of “Building Your Nest Egg With Your 401(k)” (Investors Press 1995).

 

26

Ken Berzof, "Variable Annuity May Be Wrong Choice For Retiree's IRA," Courier-Journal (Louisville, KY), March 18, 1996 at 2C

The article quotes Michael Gauss, a certified financial planner with the Financial Services Center: "If you really want insurance, it would be better to take that 1.25 percent to 1.4 percent fee and buy an insurance policy. Then, when you die, your estate would have the value of your IRA as well as the value of the insurance."

25

Jane Bryant Quinn, “A Check List: Should You Buy An Annuity?,” Washington Post, March 3, 1996 at H2

“Don’t put a VA [variable annuity] inside your retirement plan, advises Glenn Daily, a New York life insurance consultant. Retirement plans confer tax deferral on any investment you put in them, so you might as well choose mutual funds, which carry lower costs.”

 

24

Marlene Givant Star, “Overselling Of Variable Annuities,” Pension & Investments, November 27, 1995 at 8

Disturbingly, half of the assets invested in these tax-deferred insurance contracts were from already tax-protected plans.”

 

“Clearly individual investors and plan sponsors don’t understand these products, which typically invest in open-end mutual funds. The financial intermediaries that have been the dominant sellers of variable annuities to individuals in tax-exempt plans such as 457 and 403(b) plans, as well as on the retail level, have done a poor job educating customers.”

 

23

Laura M. Holson, "The 401(k) Revolution: Is It All It’s Cracked Up To Be?," SmartMoney, November 1995 at 129

The author observes that a number of employers are offering variable annuities in their retirement plans. "What’s wrong with variable annuities in a retirement plan? First of all, the main selling point of an annuity is that your money grows tax-free until you take it out. But the money you put into a qualified retirement plan already has that advantage. Meanwhile, the high costs associated with annuities – which are really insurance products – often cut deep into their return."

 

Thomas Connelly, president of financial planners Keats, Connelly & Associates says  “I can’t imagine why you would want to put a variable annuity product in a retirement plan.”

 

22

Stephen J. Butler, "Can Insurers Survive The 401(k) Shakeout," Best’s Review: Life/Health Insurance Edition, October 1995 at 68

The author predicts that someday Americans will figure out they have annuities with hidden insurance expenses in their 401(k) plans: "When these participants realize that the wonder of compound interest is working against them, they will probably take out their wrath on their high-cost 401(k) vendor and the decision makers who chose it. It’s critical that insurance firms demonstrate leadership on cost and performance. Plan sponsors and investors are about to put the hidden and indirect costs of their plans under the microscope – and many of these costs are hidden and indirect."

 

21

Stephen J. Butler, “Saving Fees For Sponsors Costly To Participants,” Pensions & Investments, August 7, 1995 at 14

“Many 401(k) vendors are subsidizing the administration costs of their plans through hidden charges -- even though these investments are described as being no-load to the participant. Often, however, the "no-load" label is simply not true.”

 

“Their 401(k) plans are wrapped in an annuity contract so that they can be sold by agents with insurance licenses across the country. While some of the programs offer no -load mutual funds as part of the package, the actual investment includes the cost of the annuity packaging fee -- which is typically 1.5% a year. . . . .[A]ssuming a 10% average per annum return, this fee would cost the $10,000-a-year contributor about $15,000 of lost earnings in 10 years and about $108,000 in 20 years.”

 

20

Scott Burns, “Researching The Ins And Outs Of Investing An IRA Rollover,” Sacramento Bee, August 3, 1995 at E2

A reader asks whether a variable annuity should be considered for a rollover IRA. “You don't need a variable annuity. You already have tax deferral with the IRA rollover. Putting the same money into a variable annuity will only add another level of expense. Variable annuities should be used by individuals in relatively high tax brackets who want to defer taxes on investment income that would otherwise be taxable.”

 

19

M. Michael Markowich, “Beware Of Financial Predators!,” HR Focus, July 1995 at 22

“There are many good financial advisors, but an increasing number of unethical agents have proven to be nothing short of financial predators.”

 

“Agents may try to sell you a tax-deferred investment (variable annuity) and have you place it into an IRA to avoid paying taxes. But this is a lot like using an umbrella indoors. Investments in IRAs already are tax-deferred, so you gain nothing extra by placing tax-deferred investments in an IRA.”

 

18

Steven T. Goldberg, "The Overselling Of Variable Annuities," Kiplinger’s Personal Finance  Magazine, July 1995 at 53

The author writes: "So, is an annuity a good idea? A lot of investors clearly think so: They poured more than $50 billion into variable annuities last year. But many – perhaps most – of those investors are misguided. Key evidence of their error is that more than half of the new money went into variable annuities inside 401(k) and 403(b) employee retirement plans or IRAs, according to LIMRA International, a financial-services research firm. This defies common sense – kind of like wearing a raincoat indoors. Those savings plans are already tax-deferred. Buying variable annuities inside them adds little but an extra layer of fees."

 

17

Leslie Eaton, “A Hot Investment Entices, But It's Not Always Wise,” New York Times, November 6, 1994 at A1

“One sign that Americans do not really understand the pros and cons of variable annuities is that many are sold to people for individual retirement accounts and the retirement savings accounts known as 401(k)'s and 403(b)'s, which are already sheltered from taxes. So these buyers may be paying a big price for a benefit they already have.”

16

Susan Bondy, "IRA Funds Not The Place For A Variable Annuity," Arizona Republic, November 5, 1994 at E3

The personal finance columnist states that "I can think of no good reason to invest an IRA in a variable annuity."

15

Mary Rowland, “Q&A,” New York Times, October 1, 1994 at A39

A reader asks whether it is a good idea to purchase an annuity with the proceeds from a 401(k) plan.

 

“Skip the annuity, advised Lynn Hopewell, a financial planner in Falls Church, Va., and the editor of the Journal of Financial Planning. `The proceeds of a 401(k) already have tax-deferred status, which you can preserve by rolling them into an individual retirement account,’ Mr. Hopewell said. `That gives you all the benefits of an annuity with none of the cost.’”

 

14

Leonard Sloane, “Q&A,” New York Times, June 18, 1994 at A37

A reader asks whether IRAs can be invested in fixed annuities.

 

“Yes, you can. . . but many financial advisers say you should not switch your I.R.A. into an annuity, because it represents an unnecessary duplication of the tax deferral. Money invested in an I.R.A. grows on a tax-deferred basis, as does money invested in an annuity, explained Avery E. Neumark, a partner of Weber Lipshie & Company, a New York accounting firm. Other types of investments probably make more sense.”

 

13

Ellen E. Schultz, "Variable Annuities Are Flowing Into IRAs, Despite Redundancy," Wall Street Journal, June 2, 1994 at C1

The article quotes Harold Evensky, an investment adviser in Coral Gables, Fla.: "There's no earthly reason to put variable annuities into IRAs or other tax-deferred accounts." Christopher Wheaton, a tax manager at Arthur Andersen in Chicago, states that a "variable annuity is not an appropriate vehicle for an IRA" because of its higher expenses.

12

Susan Tompor, "IRAs Are A Good Way To Reduce Your Tax Liability But They're Not Foolproof," Detroit News, March 8, 1994

The author advises that "[w]hatever you do, do not put your IRA money into municipal bonds or variable annuities." "It's dumb," adds Charles B. Carlson, editor of Dow Theory Forecasts, an investment newsletter based in Hammond, Ind.

11

Five Ways To Waste Money,” Fortune, October 25, 1993 at 40.

The number one “costly mistake” investors make is putting an annuity in an IRA. “An annuity gives you tax-deferred growth, so why pay IRA fees?. . . . An annuity should stand alone.”

 

10

Albert J. Fredman and Russ Wiles, “An Introduction To Investing In Variable Annuities,” AAII Journal, September 1993 at 9

“Because of the higher costs associated with annuities, you should first invest as much as you can in regular retirement plans, such as the 401(k), IRA and Keogh. If you still have money to put away on a tax-sheltered basis, then you can start thinking about a variable annuity. Obviously, you wouldn’t want to hold a variable annuity in an IRA account, just as you wouldn’t want a tax-exempt bond fund put into an IRA. You would be placing one tax shelter into another, a major mistake.”

 

Albert J. Fredman is a professor of finance at California State University, Fullerton. Russ Wiles is a business writer for The Arizona Republic.

 

9

Scott Burns, “Annuities Aren’t An End-All Solution: Financial Adviser Has A Vested Interest In Suggesting Insurance Products,” Dallas Morning News, July 13, 1993 at 1D.

There is “no reason on earth” to move an IRA to a variable annuity. “You’ve already got tax deferral. All you do is generate a commission for your adviser and increase the annual fees charged against your investments.”

8

Carla Lazzareschi, “Your Money,” Star Tribune (Minneapolis, MN), July 12, 1992 at 5D

“[O]ur financial advisers question why you are considering an annuity [for a 401(k) to IRA rollover], given the fact that your funds are already entitled to earn interest at a tax-deferred rate.”

 

7

Linda Stern, “Stop! Don’t Rush Out To Buy A Variable Annuity,” St. Louis Post-Dispatch, February 24, 1992 at 9

“It is pointless to buy an annuity with money that is already tax deferred, such as in an IRA or Keogh account. Salesmen will try to sell this but it doesn't make any sense.”

6

Thomas Waterson, “Where Not To Roll Over Distributions,” Boston Globe, November 11, 1991 at 18

“Probably the most obvious place to avoid is anything that already has a tax-deferral element, since the money in IRAs grows tax-free until it is withdrawn. That rules out insurance company annuities – insurance contracts that guarantee fixed or variable payments, usually at retirement – and municipal bonds. Annuities are `a shelter within a shelter,’ says Jane V. King, president of Fairfield Financial Advisors in Wellesley. Insurance agents often try to sell annuities as IRA vehicles, King says, by telling people they can invest as aggressively as they like within the annuity, while also providing an insurance policy for their heirs. However, the ongoing fees and commissions on many annuities take out too big a share of the return, she says.”

 

5

Glenn Daily, “Investing In Variable Annuities: The Selection Process,” AAII Journal, November 1991 at 11

“Do not invest in a variable annuity within a tax-deferred qualified plan; you incur extra expenses for few benefits.”

 

The author is a fee-only insurance adviser in New York City.

 

4

“Pocket Guide To Money,” Consumer Reports, February 1990 at 122

“The tax-deferred status of IRAs does rule out certain investments and makes others less desirable. Municipal bonds don’t belong there; a muni’s otherwise tax-free interest would become taxable at withdrawal time. Annuities are also ill-advised for nondeductible IRAs; you can enjoy their tax-deferred income outside an IRA.”

 

3

Patricia A. Dreyfus, “The IRA Boom: Where Your Money Will Grow Fastest,” MONEY, March 1986 at 66

“[A]n annuity's suitability for IRAs is open to question, and sponsors' claims about guaranteed interest rates and safety can be confusing or even misleading.”

 

“The main argument against investing IRA money in an annuity is that you are squandering a valuable tax benefit.  All earnings inside an annuity are tax deferred, whether or not it's in an IRA.  `You're putting a tax shelter within a tax shelter,’ explains Rudy Watz, director of retirement plans at Value Line Securities, which manages annuity investments for Guardian Life.  `Invest other savings in an annuity if you wish, but don't use it for your IRA.’”

 

“Attractive as annuities may sound, you don't need to buy one until just before retirement to receive guaranteed income thereafter.  Although annuities normally have two phases -- first they accumulate money, and later the disburse it as monthly income based on your age, sex and contributions -- you can skip phase one of a fixed annuity and pay the premium all at once. “

 

“It's best to postpone your decision until you're nearly ready to retire and then shop around for the highest-paying contract.  If the great day is 20 or 30 years down the line, there's no way of knowing which company will be offering the best deal at the time.”

 

2

Deborah Rankin, “Where To Put Your I.R.A. Money,” New York Times, January 23, 1983 at C17

“Insurance companies are promoting something known as Individual Retirement Annuities.”

 

“There's nothing to prevent you from accumulating a nest egg in other I.R.A. investments over the years, and then buying an annuity with all or part of that money once you reach retirement.”

 

“[M]any investment planners think that annuities are not a smart buy.”

 

1

Jane Bryant Quinn, “Annuity Not Always Best Retirement Aid,” Washington Post, January 30, 1977 at G4

Life insurance agents concede that annuities don’t build as much savings as other vehicles, Ms. Quinn writes. Therefore, deferred annuities may not belong in tax-qualified accounts such as IRAs because the annuity feature is not necessary during the asset accumulation phase. “If your goal is maximum retirement income, it is the accumulation of savings that counts, with all due respect to insurance agents who think otherwise. The more you save, the more you’ll have to retire on – and the more you’re likely to get from an [immediate] annuity when you finally buy one.”

 

 

 

 

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

 

 

 

Information about deferred annuity owners who are challenging deceptive sales practices, and seeking restitution of insurance charges and waivers of surrender penalties, is available here.

 

Additional links

 

www.403bwise.com

www.403bretire.com

www.annuitytruth.org

 


See Part 1 for rights and permissions.

 

 

Ronald A. Uitz

Uitz & Associates

1717 K St NW Ste 600

Washington, DC 20036

202-296-5280