Money Talk is a show about the world of financial and investment planning and includes listener phone call with real issues and questions. Perhaps you are considering a real estate purchase, participating in your employer sponsored retirement plan, or starting to save and invest for a future college education… Whatever the concern or questions, Carl strives to answer in plain everyday English and treat every caller with respect.

Carl Stuart is a Certified Financial Planner and a Registered Investment Advisor. He owns his own firm where he manages approximately $280 million of clients' assets.  In 2002 he was selected by Registered Representative magazine as one of the top 10 advisers in the United States. He is a Trustee and Chair of the Investment Committee of Pine Manor College in Boston, a Trustee and Chair of the Investment Committee of the Texas Presbyterian Foundation in Dallas and a board member and past Chair of the YMCA of Austin.  He has also served as the President of Big Brothers Big Sisters of Austin, and is a board member of the Peoples Community Clinic of Austin. He and his wife Claire have been married for 36 years.

September Newsletter:

I get a lot of questions about annuities on Money Talk.  Listeners regularly start by saying, “I know you don’t like annuities.”  Actually, it is not that I dislike annuities, it is that based upon listeners calls, I have come to understand many annuity purchasers are ill informed.

For example, most annuities have surrender charges.  You pay a fee, sometimes a big one, if you liquidate your annuity during the surrender charge period.  Typically, this can be a 5 to 10 year period, although I have seen 15 year surrender charge periods.  Annuities are very long-term investments.  Consequently, they are usually inappropriate for older investors.  Frequently, Money Talk callers who own annuities are in their 70’s and 80’s.

If you are going to be in a significantly lower income tax bracket, when you liquidate your annuity, the tax deferral of growth in value may be attractive.  I have found many people do not fall into a significantly lower bracket as they grow older or even when they retire.  This is because the tax brackets are pretty broad.  Here are some examples.

- 2007 Marginal Income Tax Rates
- Married filing jointly and surviving spouses
- Over $63,700 to $128,500        25%
- Over $128,500 to $195,850      28%

In other words, a married couple making $190,000 while working could have retirement income of $95,000 – a 50% decline – and their marginal tax rate would only drop from 28% to 25%.  Tax deferral can be a good thing, but it is not always as great as it is cracked up to be.

Most annuities are sold by agents who are licensed.  They deserve to get paid.  You deserve to know how much they get paid.  In my experience, many annuity owners do not know the sales charge or commission.  As a general rule, the higher the surrender charge, and the longer it lasts, the higher the commission.  If the agent will not fully disclose how she is paid, and how much, don’t proceed with your purchase.

Annuities have attractive features.  These include:

1. tax deferral.
2. guaranteed death benefit.
3. Annuitization - the ability to convert the annuity to lifetime income.

Annuities may or may not be appropriate for you.  Make sure you are an informed investor.