MEG GREEN
Q:I read your column every week and I know that you are not a fan of annuities. And after seeing last week's ''Dateline NBC'' program, I am more confused than ever. I am a teacher who will be retiring after 35 years at the end of this school year. I am 60 years old and will be completing the fifth year of the DROP program. Of course, I am being inundated by calls from financial planners and insurance company representatives who are trying to sell me different types of annuity plans.
Every advisor, without exception, has told me that the annuity they are selling is also an IRA. This is confusing to me. What is the difference between these annuity IRAs and regular IRAs?
Louise Reese
Miami
A: For the record, I don't dislike all annuities. I only object to the misuse of them and to the scare tactics many agents use.If you invest because of fear or greed, you're likely to make an error. Insurance companies offer salespeople big commissions, which are tempting to most, and thus the frenzy. Because of this, my mailbox is filled with annuity questions.
Let me explain the IRA question. An IRA, or Individual Retirement Account, allows one to save for retirement and/or roll retirement funds into when you leave an employer or retire. The Internal Revenue Service sets rules for taxability, required minimum distributions, stretch provisions, etc. Each IRA must have a custodian to keep you on the straight and narrow. Banks, trust companies, brokerage firms, mutual fund companies and insurance companies provide IRAs. An IRA annuity is simply an annuity of one kind or another purchased in an IRA account. It's that simple.
Please, please, please do not determine what to do with all your hard-earned savings with a salesman who is a stranger. Take the time to find a certified financial planner who can guide you in all aspects of retirement, including how to create cash flow, have liquidity for emergencies, keep up with inflation and, in essence, work in your best interest. This is such an important time for you to make good, clear and flexible choices. If you feel confused, don't sign anything!
Meg Green is a certified financial planner. Mail questions to her c/o Sunday Business, The Miami Herald, 1 Herald Plaza, Miami, FL 33132 or e-mail askmeg@MiamiHerald.com. Include full name and city of residence.
