Chamberlin on Money
An Annuity Inside an IRA? Don’t Be Ridiculous
Dear George: My financial adviser has suggested I buy an annuity with the money in my IRA. Is this a good idea?
, Karen, Scripps Ranch
Dear Karen: It is almost impossible for me to imagine any possible circumstance that would justify buying an annuity inside of an individual retirement account (IRA). However, never a day goes by that someone doesn’t get talked into making this mistake.
Think about what is being suggested. By definition an IRA is a tax-sheltered account. The traditional IRA is a tax-deferred vehicle that allows the money to grow without any current tax liability. The new Roth IRA is a tax-free account that eliminates all taxes if held for five years or longer.
Now, consider the advantages and benefits of an annuity. These insurance contracts allow for the tax-deferred growth of money. No taxes are due until the funds leave the annuity.
So, what’s wrong with this picture? Why would you want to put a tax-deferred annuity inside an already tax-sheltered IRA account? For the life of me I cannot think of a single reason. It’s like walking in the rain with two umbrellas. I doubt you will stay any drier with two instead of one.
There are two types of annuity contracts. The fixed annuity is similar to a certificate of deposit. You earn a fixed rate of interest for a fixed period of time. If an advisor suggests you put a fixed annuity in an IRA you should counter by simply asking for a CD instead. The CD will be federally insured while the annuity is not backed by any full faith guarantee.
The other annuity is variable. This uses the concept of mutual fund investing under the shelter of an annuity. Some advisors might say that the so-called “death benefit” of a variable policy makes it appropriate for an IRA. This guarantees that your annuity beneficiaries be returned no less than the amount you invested even if the market value has declined.
This benefit is one of the great sucker bets of all time. There has never been a 10-year period of time when the market has declined, so if you stay the course the value will almost certainly appreciate.
The main reason advisors tout annuities for IRAs can be summed up in one word: commissions. If you buy a CD in your IRA the broker will earn about 1.5 percent in commissions compared to at least 4 percent on the annuity. The fees on a variable annuity can run as high as 6 percent or more.
Annuities can be good investments in the right set of circumstances. But, inside an IRA is never the right circumstance. And, if anyone disagrees please let me know.
Dear George: I have heard some stock market commentators talk about “whisper numbers.” What does that mean?
, Keith, San Diego
Dear Keith: The quarterly release of earnings by publicly traded companies is always an anticipated event. It is not uncommon to see the price of a company’s stock move dramatically based on the way that investors and analysts react to these numbers.
The weeks leading up to these earnings reports give analysts an opportunity to look into their crystal balls to forecast what they think will be announced. Analysts rely on information from the company and other resources to come up with their estimates. These published numbers are the targets that companies hope to hit.
However, a whole other set of numbers is talked about, usually in whispers. These numbers are determined without using the propaganda pumped out by the companies. As a rule they tend to be a bit less optimistic.
It’s this second set of numbers that many institutional investors pay attention to. That is why you sometimes see a stock go down sharply even if it hits the estimate numbers that were anticipated. That’s not good enough these days. Meeting the whisper numbers is what it’s all about these days.
Chamberlin is the host of “Money in the Morning,” heard weekdays from 9 a.m. to noon on Ksdo.com A/M 1130. Send your letters to him to P.O. Box 1969, Carlsbad, CA 92018, or E-mail him at (email@example.com).
Careers Today–Joyce Lain Kennedy
Rehabilitation Efforts Pay Off in New Job Possibilities
Dear Joyce: I have been unemployed due to a back injury for eight months. I worked as a laborer, at gas stations and so forth. Without skills, the situation seems hopeless. No phony bright promises; what are my real chances of finding new employment?
Disability caused by work injuries can strike any one of us at any time. Must that hardship be the end of the work line? No. Rehabilitation services , provided through private companies identified by workers, compensation insurance carriers , exist to help you get vocational retraining and a fresh start in the workplace. Re-employment in the state of California occurs from 50 percent to 70 percent of the time. I don’t know about other states.
Frequently a political football , debates are ongoing about whether business should invest in serious vocational rehab efforts or offer higher disability benefits , rehab job training gets my vote. It’s undeniably a lifeline for disabled individuals who feel a core imperative to return to useful, fulfilling lives in new careers.
In California a number of involuntary career changers recently were honored for their new beginnings: Gloria Barela left real estate after an industry injury; following computer training she became an office manager.
William Bollinger had been a shop helper before his injury; now, after training, he’s a truck driver with a bigger paycheck. Multiple neck and back injuries ended Joseph Buckmaster’s career as a diesel mechanic; rehab training and an extensive job search resulted in a job for Buckmaster as a water treatment technician.
Deputy sheriff Theo Nash was gunned down by a suspect before enrolling in a teacher credentialing program arranged through rehab counseling; he starts teaching this year.
Particularly inspiring is Diana Smyers’ tale. With rehab, she doubled her income, moving from retail manager to computer instructor and job-placement director at a career school.
I’ve told you about these real people , and their many faces of success , so you won’t have to fear the future. My thanks to Barbara Shogren Lies of the California Association of Rehabilitation & Reemployment Professionals (www. carrp. org) for sharing these true stories, which remind us, life isn’t over when you have to figure out a new way to earn a living.
To find out if you’re eligible for vocational rehabilitation services through workers’ compensation insurance, call the information and assistance office at a local workers’ compensation appeals board.
Dear Joyce: Virtually every job ad I’ve looked at for the career field I’d like to enter says “bachelor’s degree required.” I have college credits but not the sheepskin. What about these “overnight degrees?” I know they’re worthless, but if I buy one, what are my chances of being found out?
Despite the occasional odd survey claiming as many as one-third of job seekers inflate their educational achievement, if you are discovered to be a liar, expect the job guillotine to fall. Then try to explain what happened to prospective employers.
Degree mill offers used to be on matchbook covers , now they fly across the Internet with what seems to be increasing frequency, maybe because the shamsters think the tight labor market leaves employers less time to check backgrounds. News flash: The ‘Net also makes it easy to discover histories.
Ignore offers like this: “University diplomas from prestigious non-accredited universities based on your present knowledge and life experience. No required tests, classes, books or interviews. No one is turned down.”
Kennedy is a syndicated writer and author of career guidance books. E-mail career questions to her at (firstname.lastname@example.org).
& #352;2000, Los Angeles Times Syndicate
Work Wise–Mildred Culp
Leave or a Sabbatical Can Give Temp a Leg Up
Stepping in for a person on leave or sabbatical can increase your value. However, be suspicious if your company guarantees a bonus, promotion or raise.
When a company agrees to an employee’s request for a temporary break, it has several options: putting all responsibilities on hold; assigning part or all of them to another employee or group of employees; hiring a temporary employee; and making no decision, which, in itself, is a decision to let tasks slide until the person returns.
Sean Fernandez, president of Arrow/Zeus Electronics in Westchester, N.Y., the military components operating group of the $8.5 billion global Arrow Electronics, has held three company-initiated interim positions. Arrow has a formal sabbatical policy for employees of seven years’ standing , leave-taking of up to nine or 10 weeks.
Sean reports the company encourages employees to take interim assignments. “They’re different challenges in a less risky environment,” he observes, “ones that enable you to determine whether you like the work or can do it. They’re not just for re-energizing the employee who takes a sabbatical.”
He was director of finance before commuting from New York to Chicago for 13 weeks under a previous company policy, acting as general manager during that person’s sabbatical. He points out that Arrow had asked whether he wanted the assignment rather than requiring him to take it. A family poll favored his commuting to temporary housing in Chicago for everyone.
Staci Fernandez (no relation), director of national accounts at CIGNA Healthcare in Bloomfield, Conn., a division of the $21,437 million CIGNA Corp., manages 16 employees handling health-care key accounts. She has filled in on two maternity leaves.
“The second one, which I just finished,” she explains, “lasted nine weeks. It was given to me after I’d managed several key projects within deadline.”
She plans to step in a third time to reciprocate for her own three leaves.
According to Susan Thomas, CIGNA’s corporate director of employment policies and programs in Philadelphia, the company has no sabbatical policy, but family leaves can create opportunities.
“We indicate that it’s the manager’s responsibility to determine how the work is done while the employee is on leave,” Thomas states. “While we pitch it as a developmental experience for the fill-in, regardless of the department, we’re always careful, not guaranteeing that something will come from it.”
Neither Staci nor Sean accepted interim work expecting extra compensation. Sean served in a consulting capacity to keep his finance responsibilities running smoothly. Staci, with finely tuned organizational skills, added about 10 hours per week to her schedule while spending half-time on each of the jobs. She thrived on the “joy and convenience” of delegating. Three assignments and three years later, Sean became president of Arrow/Zeus. Staci is confident the gods will smile kindly upon her at the company’s annual compensation review.
Both highly recommend planning before taking one of these assignments. Sean went to Chicago a week early to familiarize himself with the general manager’s key customers and goals.
Staci spent about two weeks learning her boss’s job. Both fill-ins had to be flexible. Staci picked up things her well-organized boss hadn’t had time to complete when she left a week early. Sean’s commuting schedule and separation from his family also required flexibility.
Nevertheless, Sean was pleasantly surprised by his acceptance among the salespeople, who could have viewed him negatively for coming from corporate for only a short period of time, with the intention of helping them set direction. He also implies that the situation might have turned out differently without the support of his family and headquarters.
Thomas, at CIGNA, maintains that the opportunity must benefit everyone: “Make certain that people are given some kind of special bonus and recognition in a staff meeting or letter to indicate … that the person counts.”
Culp sponsors the annual WorkWise Award. For information, visit (www.work-wise.com).
2000, Universal Press Syndicate