Bibliography

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 1
(independent views)

Citation Summary Excerpt
315 Raul Amaya, Variable Annuities
Not First Place You Should
Invest, EL PASO TIMES,
December 4, 2006
Because IRAs are either tax deferred or tax-free, variable
annuities, in my opinion, are not suitable for IRAs. Theyre
suitable for people coming into large lump sums who have
already maximized their contributions to their IRAs and
who could benefit from the tax deferral and/or want the
guarantees of annuities.

314 Suze Orman, Adviser Must
Serve You, Not Self, DETROIT
FREE PRESS, November 12,
2006
The syndicated columnist writes that [a]nyone who tell
you to buy a variable annuity for your IRA is clearly not
looking out for your best interest. The attraction of VAs is
that you get tax-deferred growth in mutual funds. That is,
no taxes while the money is invested in the VA. But
everything in your IRA is already tax-deferred anyway. It is
absurd to buy a VA inside your IRA. Why would the
adviser recommend this move? I bet you know where I am
going: Once again, there is a nice commission to be made.

313 Stewart Welch, Reasons To Be
Wary of Annuities,
BIRMINGHAM NEWS, October
15, 2006 at 4B
Variable annuities are a product that is rarely sought out by
investors but instead is bought after someone has `pitched
the product.

Some annuities are sold in IRA accounts which means you
have placed a sheltered investment (your IRA) inside
another sheltered investment (the annuity) resulting in an
unnecessary layer of fees.

The author is founder of The Welch Group LLC, a fee-only
wealth management firm.

312 Walter Updegrave, Retirement
Deals You Can Do Without,
MONEY, September 2006 at
It rarely makes sense to put your IRA rollover into an
annuity if youre switching jobs or still investing for a
retirement thats years away. After all, your gains are
already sheltered from taxes in an IRA. But that doesnt
Bibliography - Using A Deferred Annuity To Fund A Qualified Retirement... http://www.insurancelaw.com/bib-qualified-annuities.htm
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stop insurers and advisers from touting annuities as an ideal
rollover investment.

The guaranteed minimum income benefit or GMIB
feature of some variable annuities is of questionable
financial value because you must pay upwards of 3% of
your account balance every year for it (M&E fee plus rider
charge), yet the income youre being guaranteed is
underwhelming, to say the least, because insurers base it on
ultralow payout rates designed more to protect them than to
provide income to you.

311 Buz Livingston, A Lesson For
Teachers, THE MOTLEY
FOOL, August 30, 2006
[M]ost 403b plan choices are limited to variable annuities.
Yep, you are putting a tax-deferred annuity inside a tax
deferral mechanism. Its like taking a shower while wearing
a raincoat.

310 Ask Basic Questions In Planning
For Retirement, CONTRA
COSTA TIMES, August 21, 2006
at F4
I have never met with anyone who owned an annuity who
understood what they were invested in, why they were
invested in it and what fees they were paying. After
learning about their annuitys features and fees, most people
are upset. If annuities were simpler to understand, most
people would not buy them.

Investors are frequently sold annuities within their IRAs or
their retirement plans at work. . . . Placing an annuity in an
IRA, 403(b) or 401(k) plan is ludicrous because you are
already receiving the tax-deferred benefit free of charge.

309 Variable Annuities: Have An
IRA or 401(k)? Thats Double
Duty, WASHINGTON POST,
July 30, 2006 at F04
`With an IRA, you dont need [a variable annuity]. While
there is also a death benefit, the death benefit is so
expensive, you would be better off separating the death
benefit from the investment and buying insurance
separately, said Veena A. Kutler, a Bethesda-based
financial planner.

308 Kathleen Lynn, Retirements
High Price; How Fees Can Cut
Your Pension, THE RECORD
(Bergen County, NJ), July 9, 2006
at B01
Teachers are targeted for variable annuity sales inside
403(b) accounts, but the higher fees shave thousands of
dollars from their nest eggs. Both the SEC and the NASD
have issued warnings about annuities high fees. The
securities regulators say annuities may not be suitable in
retirement plans, because retirement plans already offer tax
deferral.

307 Jan L. Warner and Jan K.
Collings, Tax-deferred Annuity
Not Right Investment For This
Couple, PITTSBURGH
POST-GAZETTE, July 2, 2006
Because of the costs involved, we see no sound economic
reason to purchase a tax-deferred annuity with tax-deferred
dollars in an IRA or other pretax account other than to
generate a sales commission and purchase the privilege of
being charged additional fees.
2 of 17 1/15/2014 9:57 PM

306 Jim Schlagheck, The Power of
Variable Annuities,
THESTREET.COM, May 22,
2006
Some 401(k) or IRAs allow you to invest in an annuity.
That generally makes little sense. . . . If you currently have a
`shelter within a shelter, consult a tax specialist about the
wisdom of making a change.

305 Margaret E. Haering, A Bad
Marriage? Variable Annuities and
401(k) Plans, WORKFORCE
MANAGEMENT, May 2006
The bottom line is simple: When suitors come calling with
a variable annuity policy for your 401(k) plan, there are
many good reasons to resist taking the plunge. Like a bad
marriage, variable annuities may last longer than you want
and could be expensive to end.

For instance, a plan sponsor that wants to offer a lifetime
income option could do so at lower cost by providing
retiring employees with information on purchasing an
immediate fixed annuity.

304 Martin Krikorian, Seven
Drawbacks of Variable
Annuities, THE LOWELL SUN,
May 5, 2006
If youve talked to a broker or agent about rolling over
your retirement account, theres a good chance the adviser
recommended you invest in a variable annuity[.]

When an adviser, agent or broker suggests a variable
annuity for your rollover or IRA account, run -- dont walk
-- out of the office. Since IRAs already are tax-advantaged,
a variable annuity will provide no additional tax savings. It
will, however, increase the expense of the IRA while
generating fees and commissions for the broker or
salesperson.

The author is a registered investment adviser and president
of Capital Wealth Management.

303 Josh Friedman, Seniors Get A
Hard Sell On Fee-Laden
Annuities, LOS ANGELES
TIMES, April 24, 2006 at A1
Dorothy Dot Eddy, 72, a retired middle manager for an
electronics maker, says she got taken in by a free lunch
seminar at the Chart House, run by an agent pitching
annuities. Then, the agent invited the attendees back to his
office for a personal consultation with the promise of free
coffee and fresh-baked cookies. She agreed to use her IRA
money to buy an annuity, but was never told that the
annuitys tax deferral was essentially worthless to her,
because her savings already were protected from taxes in an
IRA.

302 Eric Tyson, Do I Have Enough
Life Insurance?, SAINT-PAUL
PIONEER PRESS, April 8, 2006
at 2C
With money already inside a tax-sheltered IRA account,
you should not then invest in an annuity. The reason:
Youre paying extra costs for the tax shelter of an annuity,
which is not needed and is redundant with an IRA account.

301 Frederic G. Marks, Tax-Shelter
Tango: Keep your IRA,
BARRONS, March 27, 2006
Although variable annuity prospectuses in recent years have
started to disclose that no one should invest IRA money in
an annuity for tax shelter. . . . more than 50% of funds now
3 of 17 1/15/2014 9:57 PM
in variable annuities have been transferred from IRAs and
other tax-sheltered vehicles, presumably at the urging of a
sales agent. The enormous pool of retirement funds is a
tempting target for agents seeking fat commissions.

300 Russ Wiles, Variable Annuity In
IRA Offers Little, ARIZONA
REPUBLIC, March 19, 2006
Mr. Wiles disagrees with NAVAs position that annuity
insurance guarantees can offer great value for IRA
investors. Other than a terminally-ill person seeking to
maximize the value of the nominal death benefit feature, in
general, the annuity-inside-an-IRA argument isnt
compelling, especially if its cited in hopes of selling you a
higher-cost investment that you dont need.

299 Archie Richards, Annuities A
Bum Deal For Some,
REPUBLICAN-AMERICAN
(Waterbury, CT), December 18,
2005
A readers accountant suggested that she needs a retirement
plan with tax advantages, and recommended a MetLife
variable annuity.

Accounting organizations made a big mistake when they
authorized accountants to sell investments. The conflict of
interest is too great. The annuity is a bum deal because
you do not need to pay the costs of the annuity to have an
IRA. The death benefit of the annuity isnt worth much, so
forget the variable annuity.

298 Neil Weinberg, Shelter Skelter,
FORBES, December 12, 2005 at
148
The insurance features of variable annuities dont do much
to make a tax-deferred annuity a good retirement
investment. . . perhaps the most galling and unnecessary
use of variable annuities is to fund retirement accounts that
are already tax deferred, a costly variety of overkill.

Pacific Life sold 54% of its variable annuities to persons
funding IRAs and other retirement accounts in the first half
of the year. In May, a federal court in Brunswick, GA
certified a nationwide class of 120,000 investors who were
sold Pacific Life variable annuities for funding retirement
accounts without proper disclosures or suitability screening.
Pacific Life says in a written statement that it strongly
disagrees with the claims.

297 Eric Tyson, An IRA Invested In
An Annuity, SAINT PAUL
PIONEER PRESS, December 1,
2005 at 2C
A couple wonders whether they would be better off if their
IRAs were invested in mutual funds rather than variable
annuities. The response: since they have the fashion
equivalent of wearing a belt and suspenders together, they
should invest in mutual funds and save the unnecessary
expense of the annuity.

296 Timothy Middleton, Teachers
Investment Plans Flunk,
MONEYCENTRAL.MSN.COM,
403(b) plans could hardly be worse: fees are outrageous,
theres no match and theres no oversight. The insurance
companies that dominate this marketplace have done a
4 of 17 1/15/2014 9:57 PM
November 8, 2005 terrible job of helping workers, but a masterful one of
concealing their abuses by simply refusing to reveal them to
anyone -- especially the participants whose money they are
frittering away. The annuity insurance charges for the
death benefit are pure profit for the insurance company
because over long terms, markets are rarely, if ever,
down.

295 Mike Clowes, Wrong Pew:
Churchs 401(k) Put In A VA,
INVESTMENT NEWS, October
31, 2005
A church member was an insurance agent and sold the
church a variable annuity for funding their 401(k). The
Investment News columnist was asked by another church
member whether this made any sense.

This is a clear example of a highly inappropriate use of a
variable annuity. . . .The insurance agent, who knew the
variable annuity was for a 401(k) plan, should not have sold
it for that purpose. Obviously, he couldnt resist easy
money. Transactions such as these give variable annuities,
and those who sell them, a bad name.

The article explains that neither the tax deferral or
insurance features of a variable annuity make any sense for
401(k) plan participants.

294 James L. Watt, Variable
Annuities, Retirement Accounts
Shouldnt Mix, FORT COLLINS
COLORADOAN, September 11,
2005 at 2E
The author is a fee-only financial advisor.

He says it is not unusual to find that his clients were sold
variable annuities inside their retirement accounts by
brokers at well-advertised brokerage firms. He says this is
inexcusable, and the brokers should know that it is
unsuitable. The variable annuity is costly for you and
rewarding to the broker.

293 Ray Unger, Are Annuities
Really Good for IRAs?, THE
CAPITAL TIMES (Madison,
WI), August 26, 2005
The author is president of Unger Capital Management in
Madison, WI.

Mr. Unger cautions against making the mistake of putting
one tax sheltered financial product (annuity) into another
tax sheltered vehicle (IRA). The front-end commissions
and annual charges are simply not worth it. He supports
his analysis with historical performance statistics for the
S&P 500.

A follow-up article on September 9, 2005 is titled Yes,
Annuities Have A Place, Just Not In IRAs.
292 David Futrelle, George Mannes,
Cybele Weisser, 15 Dumb
Moves, MONEY, July 2005 at
84
One of the 15 dumbest things you can do with your money
is [b]uying tax-free bonds and variable annuities for your
IRA. Its like wearing a poncho and carrying an umbrella,
only worse. You get no extra tax benefit from the annuity,
and the bonds interest will end up being taxed.
5 of 17 1/15/2014 9:57 PM

291 Neil Weinberg, Fleecing
Teachers: A Billion-Dollar
Ripoff, FORBES, April 25, 2005
at 100
Teachers unions are complicit partners in the sales of
deferred annuities to 1.5 million teachers at the nations
public schools for 403(b) plans. Unions play a large role in
teachers decision making. One source says that Security
Benefit pays the National Education Association $3 million
a year for an exclusive endorsement for its products. The
New York State United Teachers union receives $3 million
every year to endorse ING as the shops exclusive provider
of annuities. Participants end up paying for it through
substandard products with high fees.

The main appeal of variable annuities is their tax deferral,
yet teachers already have that in their 403(b) plans. AIG
VALIC, the largest vendor of retirement savings plans for
teachers, says it has revised its sales literature to more
accurately portray the product.

290 Walter Updegrave, Was My
Mom Conned?,
CNNMoney.com, April 12, 2005
The readers mom was sold an IRA annuity. An IRA
annuity is really nothing more than buying an annuity of
some sort and putting it inside an IRA.

You can get the same tax shelter merely by putting the
money into a mutual fund within the IRA rollover account.
So the annuity is redundant. Youre already getting tax
deferral within the IRA, so theres no need for the variable
annuity. Now, that redundancy might not be a problem,
except for one thing: variable annuities tend to have much
higher fees and expenses than mutual funds.

Variable annuity fans argue that there are other benefits
that compensate for these higher fees. But I dont think they
make a convincing case. Moreover, if you want to
annuitize, I believe its better to wait until youre ready to
draw on that income before buying [an immediate] annuity
rather than do it many years in advance.

289 Jack Naudi, Variable Annuities
Arent Worth The High Fees, ST.
LOUIS POST-DISPATCH, April
10, 2005
Theres no good reason to offer a tax-deferred product,
like a variable annuity, in a 401(k) or 403(b) tax-deferred
plan. If your company does, clip out this column and show
it to your human-resource folks. To them, I say this: You
have a fiduciary responsibility to your employees, and
offering them a high-fee, tax-deferred investment vehicle
inside a tax-deferred account violates that obligation.

288 Harry Gross, Harry Gross
Column, PHILADELPHIA
DAILY NEWS, March 7, 2005
The financial advisor that sold an annuity to the readers
parents says the mom cant make withdrawals until the
annuity matures. Harry says the toad who sold them the
annuity is trying to hide the fact that there will be a stiff
penalty for cashing in early. . . . Annuities, especially
variable annuities, rarely make sense as an investment.
6 of 17 1/15/2014 9:57 PM
They never make sense as part of a 401(k), IRA, or other
tax-sheltered retirement plan.

287 Rick Miller, One on One with
Adam S. Bold of The Mutual
Fund Store, INVESTMENT
NEWS, February 14, 2005 at 39
An interview with syndicated radio call-in host Adam S.
Bold, founder of The Mutual Fund Store.

Mr. Bold argues that advisors sell variable annuities, despite
their many drawbacks, because these things pay higher
commissions than just about anything else that a
commission broker sells. Theres a tremendous amount of
annuities that are sold in IRA accounts. I believe that that is
on the verge of malpractices; its not illegal, but I dont
understand why its not.

286 Jeffrie Voudrei, Dont Put Your
IRA In A Variable Annuity Part
I and Part II,
Guardingyourwealth.net,
February 1, 2005
I believe the only reason a variable annuity is
recommended for an IRA is so the advisor can earn more
money.

The death benefit is the main argument sellers give for their
recommendation, but this is either the most expensive
insurance youll ever buy, or it [the variable annuity fees]
pays for more than insurance.

The real reason that you are recommended a variable
annuity for your IRA isnt that its better for you. Its
because its better for the advisor. If you invest $500,000 in
a commission-based mutual fund, the advisors gross
commission will only be about $10,000. The same
investment in a variable annuity would yield gross
commission to the advisor of $30,000-$35,000 or more!

285 Eric Tyson, IRA Is No Place To
Hold an Annuity, SAINT PAUL
PIONEER PRESS, January 22,
2005 at 2C
The syndicated columnist writes that an annuity should not
be purchased and held within an IRA. It takes 15-20 years
before the tax deferral benefit overcomes the higher fees
when the annuity is held outside an IRA, so why put
money into an annuity, with its higher fees, when you dont
need its tax shelter? If someone sold you an annuity for
your IRA, Im not surprised. Ive seen this happen far too
often when investors are working with sales representatives
eager to earn a commission.

284 Pamela Yip, Saving In Tougher
Times, DALLAS MORNING
NEWS, January 10, 2005 at 2D
Bob Stowe, a certified financial planner with Stowe
Financial Planning LLC in Plano, TX, evaluates the
finances of Helene Uritz, a flight attendant with United
Airlines. Mr. Stowe says Ms. Uritz made a mistake in
purchasing a variable annuity from another financial adviser
with $130,000 rolled over from a tax-deferred retirement
account. `She needs to understand that not all financial
advisers are fiduciaries, and some of them dont act in her
best interests, he said.

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`The normal process of retirement planning is to determine
retirement needs, determine the required assets and return
to meet those needs, and implement or modify the
investment program to ensure that the assets will be
available when needed, Mr. Stowe said. `The variable
annuity in the rollover IRA has violated this process in
every way imaginable.

Ms. Uritz did not need the tax deferral advantage of the
variable annuity, and she doesnt have dependents so
there isnt even an argument that she needed the death
benefit.

283 John Henry McDonald, Variable
Annuities Within IRAs,
News8Austin.com, January 3,
2005
Theres no reason to have variable annuities in IRAs,
other than generating a large commission for the broker.

Sellers argue that it makes sense because you can convert a
deferred variable annuity into a payout annuity. Well, you
can do that with your mutual funds as well. What I mean
by that is because these dollars are held inside the IRA,
there are no taxes incurred when you sell them. So you can
take half of your IRA dollars and buy [a payout] annuity
with them. Or take three quarters of your IRA dollars and
buy an annuity with them.

The author is a certified financial planner and President of
Austin Asset Management Company.

282 Walter Updegrave, Ask The
Expert: Safety First: Fixed vs.
Variable Annuity,
CNNMoney.com, December 3,
2004
Mr. Updegrave distinguishes between a payout annuity
and a deferred annuity. Only a payout annuity can make
sense in an IRA. A deferred annuity has an additional layer
of fees you do not need to pay because the IRA already
shelters your earnings from taxes.

Unfortunately, there are many sales people out there who
are only too eager to take IRA money that sits and CDs and
mutual funds and roll it into annuities. I cant say whether
they do that because they really believe its a good thing to
do or because such a transfer results in a nice commission
for them[.]

281 Mike Palmer, The `Hertz
Advisor and Not Exactly,
ROCKY MOUNT TELEGRAM,
November 8, 2004
Mike Palmer, with the Trust Company of the South, writes
that hes seen enough broker-sold variable annuities inside
IRAs to conclude that a stockbroker is no more qualified
to build your investment portfolio than your real estate
broker is to build your home.

If broker were held to a fiduciary standard of care,
conflicts of interest would come to a screeching halt.

8 of 17 1/15/2014 9:57 PM
280 Warren Boroson, Planner Sees
Smart People Make Mistakes,
DAILY RECORD (Parsippany,
NJ), October 13, 2004
Even smart, educated people make financial mistakes. A
fee-only financial planner says one of his new clients was a
female professional who owned a tax-deferred variable
annuity inside a tax-deferred IRA.

Totally inappropriate, he calls it. It was a waste of the
tax-deferred IRA. Or a waste of the tax-deferred annuity.
And the added cost of the annuity was unnecessary.

279 Kathy Chu, Variable Annuities:
A Bad Wrap?, WALL STREET
JOURNAL, October 4, 2004 at
R7
The article tells the story of James Walker, a Stone
Mountain, Ga. resident who trusted the recommendation of
an advisor at a bank to use a variable annuity for his
rollover IRA of a pension account he had at his employer,
United Parcel Service.

Mr. Walker had to wait 7 years for the surrender fee on the
annuity to expire. Ì felt I had been had, I felt I had been
used, said Mr. Walker, who has now transferred his money
into mutual funds in another IRA. I wish someone would
have explained this to me, because I didnt need this
insurance.

While the majority of variable annuities are sold inside
retirement plans, at least some variable annuity sellers wont
sell them to qualified plan investors. We dont even allow
people to invest in our deferred variable annuity within a
qualified plan, said Rob Nester, a principal at Vanguard
Group in Valley Forge, Pa. We spend time every day
talking people out of it.

278 John Wasik, Annuities Can Be
Of Value -- Or An Albatross,
PITTSBURGH POST-GAZETTE,
September 26, 2004 at F5
The article observes that variable annuities have been
intentionally sold to customers to place inside IRAs, which
is an unnecessary move since such accounts already offer
tax-deferred compounding.

I had a client who was an ill woman in her 70s who was
sold annuities for her IRAs, said Blaine Dunn, a fee-only
financial planner in Wincester, Va. She didnt even know
she was being sold an annuity. It was done solely for
commission. It was legal, but not ethical.

277 Walter Updegrave, Ask The
Expert: Annuity Confusion,
CNNMoney.com, September 3,
2004
Deferred variable annuities do not make sense for moving
401(k) money to a rollover IRAs, but an immediate annuity
can be a decent choice if you need lifetime income. With
a deferred variable annuity, youve gained nothing using
it in an IRA because the tax benefits are unnecessary. The
death benefit feature provides protection against a
low-probability event that the market is down over a long
period of time, but that feature is not worth the high fees
that erode returns and result in a smaller nest egg for
retirement.
9 of 17 1/15/2014 9:57 PM

276 Michelle Singletary, On The
Variable Annuities Alert,
WASHINGTON POST, July 25,
2004 at F01
The SEC and NASD have issued a joint report on variable
annuity sales practices that has three words for investors
purchasing variable annuities: Watch your back.

[P]urchasing a variable annuity within a tax-advantaged
account will provide no additional tax savings, according
toSusan Wyderko, the SECs director of the Office of
Investor Education and Assistance. It will, however,
generate fees and commissions for the securities
salesperson.

275 Matthew Lubanko, Variable
Annuities: Beware of Pitfalls,
HARTFORD COURANT, July
18, 2004 at D3
Many advisers also sell variable annuities inside IRAs or
other tax-defered savings plans. `Ninety-nine percent of the
time, such sales amount to malpractice. An IRA or 401(k)
is already tax-deferrred. A variable annuity just weighs
down your retirement savings plan with extra expenses,
says Benjamin Tobias, a certified financial planner in
Plantation, Fla.

Robert Nestor, principal of retiree services at Vanguard
Group, notes that the break-even point (the year in which
savings from tax deferral begin to outweigh the expenses
incurred from owning a variable annuity) is well beyond 20
years when a variable annuity is purchased outside of an
IRA.

274 Elliot Blair Smith, AmSouths
Sales Tactics Draw Fire In
Mississippi, USA TODAY, July
12, 2004 at 1B
The article describes the human tragedy of what went
wrong in Starkville, a town in Mississippi where Jim
Moorehead, a salesman for a brokerage subsidiary of
AmSouth Bancorporation, made a million dollars in
commissions pushing variable annuities on unsuitable
purchasers. AmSouth has a history of regulatory
reprimands alleging lax supervision and compliance
procedures.

The article includes case histories of some of Mooreheads
unhappy customers, who have variable annuities funding
their rollover IRAs, and did not need the tax benefits or
insurance features of variable annuities.

273 Kathleen Lynn, Costs Are High,
Access To Money Difficult With
Variable Annuities, DULUTH
NEWS-TRIBUNE, June 12, 2004
[T]ax deferral is wasted when the annuity is purchased
inside an individual retirement account, as often happens.
Thats because retirement accounts already offer tax
breaks.

Karl Graf, an accountant and financial planner in Wayne,
N.J. often sees annuities inside IRAs, which `makes me
cringe. He recently signed on a new client who had earlier
placed $200,000 in a high-priced annuity within an IRA.
Most annuities allow the withdrawal of 10 percent a year
10 of 17 1/15/2014 9:57 PM
without penalty, and Graf plans to use this option to `try to
suck the money out of the annuity.

272 Jeffrey R. Kosnett, Watch Your
Step As Retirement Nears,
KIPLINGERS PERSONAL
FINANCE, June 2004 at 36
A profile of a retirement investor reveals that he has
$313,000 in a variable annuity inside an IRA which is a
bad idea because the IRA already provides tax deferral, the
annuitys main benefit. The investor should move his
money out of the annuity into another investment to save
substantially on annual fees.

271 Tami Luhby, Before Buying
Annuities, NEWSDAY, May 2,
2004 at E07
Investors should consider buying an annuity after they
have made the maximum contributions possible to other
retirement options, such as 401(k)s and individual
retirement accounts, said John Wesley, TIAA-CREFs
product manager for nonpension annuties. Annuities also
should not be bought in accounts that already offer tax
deferral.

270 Walter Updegrave, Rolling Back
Out Of An Annuity,
CNNMoney.com, April 23, 2004
A 30 year old reader rolled his 401(k) plan money into a
deferred variable annuity funding a rollover IRA on the
recommendation of a financial adviser, and now the reader
has second thoughts. Mr. Updegrave writes back that the
main benefit of a variable annuity is tax deferral, and the
reader does not need tax deferral, [s]o, essentially, my
problem with someone your age rolling a 401(k) or IRA or
any other tax-advantaged account into a variable annuity
within a rollover IRA is that you end up apying more for the
benefit of tax deferral than you should. Mr. Updegrave is
in favor of using payout annuities to create a lifetime
income benefit from a portion of qualified plan accounts,
but you do not need to invest in a deferred annuity to have
this benefit. You can purchase a payout annuity when you
are ready for one.

269 Germaine Giani Weldon,
Security Dealers Issue Investor
Alerts, BILOXI SUN HERALD,
March 21, 2004 at D3
A variable annuity is also not suitable for IRAs because
you would be putting one tax-deferred product into
another. There are no additional advantages, just higher
fees.

The author is a CPA with Alexander, Van Loon, Sloan,
Leven, and Favre, PLLC and AVL WealthCARE, LLC.

268 Annuities 101, CNNfn, March
1, 2004 at 5:00pm
Gary Schatsky, a fee-only financial planner, remarks that
you shouldnt even consider a variable annuity unless
youve maxed out on your 401(k), IRA and any other
available retirement plan. Michael DeGeorge, general
counsel for the National Association for Variable Annuities,
replies that variable annuities are appropriate for people
who have a long-term investment horizon, people who are
saving for retirement. I agree with Gary, people who have
maxed out first on their 401(k) or other qualified plans, and
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who are looking for additional tax-deferred growth.

Jonathan Krasney, president of Krasney Financial and a
CFP, states that one of the problems, frankly, that I have
with variable annuities is that they are frequently offered as
IRAs and qualified accounts. And to me, why would
somebody need to pay the expenses inherent in a variable
annuity when they are making an IRA investment. . . [t]he
are superfluous if youre using them for an IRA or SEP or
some other kind of qualified retirement plan. . . [people do]
not have to pay the roughly 1.5 percoent mortality expense
and administratiion charge thats inherent in [variable
annuities.]

Next, several callers to the program complain that they were
missold an annuity in their qualified plan -- a tax shelter
within a tax shelter[.]. Krasney advises the callers that
they try to negotiate a lower surrender fee to get out.

267 Sheldon Bell, Money
Management For Seniors,
DESERT SUN (Palm Springs,
CA), February 26, 2004 at 2B
The potential tax benefits to you as a variable annuity
investor usually take 20 years or more. . . Brokers love to
sell everyone variable annuities, as they receive a high
commissino and VA investments are not subject to `break
points -- reduced commissions based on invested dollars. . .
[s]o beware if your broker suggests a variable annuity for
you, especially for your IRA account[.]

266 Jim Spreng, Annuities Arent
Always A Good Choice,
BUCYRUS TELEGRAPH
FORUM (Bucyrus, OH),
February 24, 2004 at 2D
Many annuities are sold to, and held inside, an IRA or a
403b. We definately do not agree with this philosophy. . .
We see absolutely no good reason to buy a
high-commission, tax-deferred product to hold inside an
account that is already growing tax-deferred. It is
redundant to have two tax-deferred products together,
especially one with such high fees. . . If you need additional
life insurance, term insurance is by far the most
cost-effective manner.

The author is a registered Investment Advisor with Spreng
and Pigman Financial Advisory Group, Inc. in Bucyrus,
Ohio.

265 Kenneth Hooker, The Adviser,
BOSTON GLOBE, February 8,
2004 at E4
A reader writes that her adviser suggests he move his IRA
mutual funds into a no-load variable annuity that has a
death benefit feature.

Mr. Hooker explains that this element of insurance allows
the annuities to qualify as tax-deferred investments. It is for
that reason that many people buy them, figuring that the
cost of the insurance required to establish these as annuities
is a fair price for the benefits of tax deferral. However, you
already have achieved tax deferral by dint of having this
12 of 17 1/15/2014 9:57 PM
money in IRA accounts. Mr. Hooker says if it were his
account, he would stick with the mutual funds.

264 Ann Perry, Couple Seeking A
Happier Retirement, SAN
DIEGO UNION-TRIBUNE,
February 8, 2004
Glenda Moehlenpah, a CFP with Financial Bridges, was
selected to review a retired married couples financial
situation (ages 69 and 61) as part of money makeover
program sponsored by the newspaper and the San Diego
chapter of the Financial Planning Association. Moehlenpah
noticed that a previous financial adviser had invested the
husbands IRA in a variable annuity.

Annuities, which usually carry high commissions, are for
investors who have maxed out all other tax-deferred
options, which Ziggy had not. In cases where annuities are
sold for IRAs, Moehlenpah said, the variable annuity
doesnt benefit the investor, ìt benefits the person who sold
it. The IRA is already tax-deferred. There is no reason to
put a tax-deferred investment product like an annuity inside
of it. Ìt means your return is reduced by having this extra
layer of expenses, Moehlenpah said.

263 Pat Holland, Theyre Back --
Variable Annuities, LEDGER
DISPATCH (Jackson, CA),
February 6, 2004
The author is a fee-only investment advisor in Jackson, CA.
One major concern is when a tax deferred retirement plan
like a 401(k), IRA, etc. is placed within an annuity. Since
the retirement plan is already tax deferred, there is never,
repeat, never a reason to put any [variable annuity in a
retirement plan like an IRA] except for the commissions
they generate for the salesperson.

262 Theo Francis, How Variable
Annuities Can Gnash Investors,
WALL STREET JOURNAL,
February 6, 2004
Variable annuities mean big money for the companies and
people that sell them -- and, all too often, big drawbacks for
the investors that buy them. [S]ome 60% of annuity sales
are made within IRAs and other accounts in which gains
already receive the identical tax treatment. Thus, paying
the higher cost of a variable annuity for that benefit is a
waste.
261 Rick Kahler, Is An IRA A Good
Investment?, RickKahler.com,
January 30, 2004
One thing you dont ever want to put in an IRA is a
variable annuity. Like an IRA, an annuity is a tax-deferred
bucket to put investments in. Since your IRA investment is
already tax-deferred, it makes no sense to put another
tax-deferred investment inside it -- especially since fees for
annuities are high because youre paying for insurance
protection.

The author is a fee-based advisor with the Kahler Financial
Group in Rapid City, SD.

260 Warren Boroson, Free Lunch
And Some Valuable Lessons,
PARSIPPANY DAILY
RECORD, January 27, 2004
The lure of a free meal attracts people to investment
seminars. The worst sales pitches are for deferred variable
annuities, most of which bestow lavish commissions on
their money-grubbing salesmen. A seminar by Gregory L.
13 of 17 1/15/2014 9:57 PM
Daniel, a CFP from Hacksensack, gave some useful,
objective advice, such as: Dont put annuities into IRAs.
(You waste the tax-deferral benefits of one of the two.).

259 Emily Hall, The Downside Of
Variable Annuities,
Morningstar.com, January 21,
2004
A reader writes to ask why there would be a variable
annuity funding his companys 401(k) plan.

The Morningstar analyst responds that the readers and
others in similar situations should complain to their human
resources personnel about the decision to use a
tax-sheltered investment product in a tax-deferreed
account. The costs and surrender fees of annuities
usually outweigh their benefits, and the tax benefits are
unnecessary for 401(k) plan investors.

258 Ken and Daria Dolan, Dolans
Unscripted, Retirement Mistake:
Not Using A 401(k) To Best
Advantage, CNNfn, December
22, 2003
The guest is Matthew Tuttle, president of Retirement
Solutions, and the question from a viewer is whether a
broker trying to sell an annuity for a 401(k) plan rollover is
acting in the viewers best interest. Ken Dolan calls the
broker an imbecile, Tuttle says the annuity investment
should be measured by yield to salesperson, and Daria
Dolan says she likes to think of it as a P/E radio, a
payment extraction ratio.

The $2 trillion sitting in 401(k) plans is a treasure trove for
unscrupulous brokers, says Ken Dolan. This prompts
Greg to call in, who says he sells annuities and he objects
to Ken Dolan calling the brokers who sell annuities
imbeciles. When Greg points out that variable annuities
include a death benefit feature, Daria Dolan responds that
most of us dont invest so we can drop dead and be made
whole. Ken Dolan concludes that when you sit on our
radio show for 15 years and find out how some people have
absolutely wiped - literally wiped out by variable annuities,
you come to not like anything about variable annuities.

257 Timothy OConnor, Variable
Annuities - Not For You?,
BUSINESS REVIEW (Albany,
NY), October 31, 2003
The single most important selling feature of a variable
annuity is the fact that investments inside the variable
annuity grow on a tax-deferred basis to the investor.

The single largest area of investor victimization involving
variable annuity sales-practice abuses is the sale of large
variable annuity contract policies into IRA and ERSIA
qualified retirement accounts funded with large rollover
distributions of employer-sponsored retirement savings
plans. The victims are usually financially unsophisticated
and inexperienced employees retired from manufacturing,
service and utility industry jobs.

The author is a shareholder in the law firm Ainsworth
Sullivan Tracy Knauf Warner and Ruslander in Colonie, NY.
14 of 17 1/15/2014 9:57 PM

256 Humberto Cruz, Planners
Annuity Advice Could Be
Costly, SUN-SENTINEL (Ft.
Lauderdale, FL), October 27,
2003 at 22
A reader writes in that his retired parents recently changed
financial planners. The new planner moved one of their
traditional IRAs into a variable annuity. Does the variable
annuity make sense?

Cruz replies: Every time I get a letter such as yours --
which is at least twice a month -- I want to scream because
it is likely that big commissions is the motivation for the
sale of variable annuities for IRAs. So the bottom line is,
unless the annuity features mean a lot to your parents, they
are paying an unnecessary expense for a tax deferral they
already had in their IRA.

Cruz suggests considering a variable annuity only if you
have funded other tax-deferred plans to the maximum.

255 David J. Drucker, Do Annuities
Qualify For Your Clients?,
FINANCIAL ADVISOR, October
2003
The use of annuities in IRAs and other qualified accounts
often finds favor with the ones selling annuities, although
planners of all compensation stripes will take the other side
of the debate.

Carol Wilson, of Wilson Financial Advisors Inc. in Salt Lake
City, Utah feels that a tax-deferred vehicle has no place in
an IRA or qualified plan that is, in itself, tax advantaged.

Warren McIntyre, of VisionQuest Financial Planning, in
Troy, Michigan, says Annuities are sold because the
àdvisor makes the most money on this product. Is the
seller really going to avoid the huge IRA market just
because its the right thing to do? Of course not, he says.

Dan Roe, of Budros & Ruhlin Inc., in Columbus, Ohio, says
that variable annuities can make sense in IRAs in the
distribution phase i.e. as payout annuities.

Scott Leonard, of Leonard Wealth Management, in El
Segundo, California, says [t]here is zerio justification for
putting a tax-deferred annuity inside an IRA. However,
when it comes to annuitizing, the argument flips and a very
strong case can be made that the product [a payout annuity
rather than a deferred annuity] belongs inside an IRA[.]

254 Karen M. Kroll, Variable
Annuities: Down But Not Out,
bankrate.com, September 23,
2003
[T]hanks to new federal tax cuts, investors are wondering
if they should keep the insurance products in their
portfolios because variable annuities convert what would
be capital gains and dividends, taxed at lower rates, into
ordinary income taxed at the highest rates.

One important note: `You never want to use annuities in a
qualified retirement plan, such as a 401(k) plan, says
15 of 17 1/15/2014 9:57 PM
[Lewis] Mandell [professor of finance and managerial
economics with the University at Buffalo in Buffalo, New
York]. That's because 401(k)'s and other qualified plans
already allow you to accumulate money on a tax-deferred
basis. There's no sense in paying the higher costs of an
annuity when you can simply invest in a mutual fund and
reap the benefits of deferring taxes less expensively.

This article was also syndicated in print newspapers.

253 Advice on Planning For Your
Future, CNNfn, August 19, 2003
at 5:00pm
The guest is Ray Loewe with the GE Financial Center for
Financial Learning. A caller says his financial planner is
recommending a variable annuity for his $500,000 IRA.
Mr. Loewe responds that a variable annuity sounds strange
here because this is an IRA account and youre already
getting the benefits of tax deferral.

Youd be paying a fee to an insurance company to give
you tax deferral you dont need.

252 Retirement Planning Advice,
CNNfn, August 5, 2003 at
5:00pm
The guest is Rick Applegate of First Commonwealth
Financial in Pittsburgh. Kim, in Kentucky, writes to the
show that he wonders about the merits of investing $75,000
in a variable annuity recommended by a salesman who got
more out of this annuity than me because the salesman
got a 7% commission. Mr. Applegate says that annuities are
sold to people, as opposed to used as a financial instrument
that makes appropriate sense. If the variable annuity is
inside of an IRA, you got suspenders and a belt. Why
have a deferred annuity with an IRA wrap? It doesnt make
any sense.

251 Patti S. Spencer, Buying An
Annuity In Your IRA: Its Still A
Bad Idea, INTELLIGENCER
JOURNAL (Lancaster, PA),
August 4, 2003 at 5
On a list of stupid things people do to mess up their IRAs,
number 8 is buying an annuity for an IRA. The IRA is
already tax deferred, you dont need to buy a product for
tax deferral - the IRA already gives you tax deferral.
Variable annuities have more moving parts than a 747 and
the insurance features are costly relative to their slim
benefits. Accordingly, [i]f you already have tax deferral in
an IRA vehicle, there is no way the numbers will put you
ahead over the long term when compared to another
investment in the IRA.

A NASD investor alert published May 27, 2003 -- titled
Variable Annuities: Beyond the Hard Sell -- reaches the
same conclusion. It states that [s]ince IRAs are already
tax-advantaged, a variable annuity will provide no
additional tax savings. It will, however, increase the
expense of the IRA, while generating fees and commissions
for the broker or salesperson.

16 of 17 1/15/2014 9:57 PM

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

updated: January 12, 2007
email: inquiries at insurancelaw dot com
All Rights Reserved.
Permission is not necessary to link to this page.

Ronald A. Uitz
Uitz & Associates
1717 K St Nw Ste 600
Washington, DC 20036
202-296-5280

17 of 17 1/15/2014 9:57 PM

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