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One Way to Compare Tax-Sheltered Annuities


Q: My wife and I both contribute to tax-sheltered annuities. Is there a way to find out how well these annuities are performing in comparison to others? We do not just want to check on the financial solvency of the insurance companies but on the actual performance of the contracts. --R.F.

A: There are several sources of the information you are seeking. But, be advised: None of the companies that track these investments follows every annuity under the sun. Further, these analyses are based on historical data and do not purport to predict how the annuities will perform in the future. Finally, investors thinking of purchasing an annuity contract might want to consult a financial planner in addition to conducting their own research. A qualified planner--preferably one whose income does not depend on annuity commissions--can help you determine which of the investments your research has singled out is best suited to your needs. That said, here are some independent sources worth considering:

* Comparative Annuity Reports tracks about 180 fixed-rate annuities in its monthly newsletter and ranks them according to their interest rate payout. Fees are $10 per month or $80 per year. Separate reports on the safety rankings of the issuing insurance companies, as rated by A. M. Best and Standard & Poor's, are available for $12 per insurance company. The report can be ordered by writing to P.O. Box 1268, Fair Oaks, Calif. 95628 or by calling 916-487-7863.

* Morningstar Variable Annuity Life Performance Report, which tracks and rates about 1,100 annuities, is perhaps the best-known rating service. The report costs $125 per year, including monthly updates, or $55 per quarter. To order call 1-800-876-5005.

* Annuity and Life Insurance Shopper monitors 260 variable-rate annuities and lists their interest rates, policy features and the safety rankings of their issuing insurance companies as issued by A. M. Best, Standard & Poor's, Moody's, Duff & Phelps and Weiss Research. The shopper is published four times a year and the cost is $45 per year or $20 for a single issue. To order write to 98 Hoffman Road, Englishtown, N.J. 07726 or call 908-521-5110.

* Best Retirement Income Guide, published by A. M. Best, tracks 450 annuity plans, offering comparative information and rankings. The guide, which costs $57, is published in a two-volume set each year. The first volume is issued in the fall, and the second six months later.

How to File for a State Tax Refund

Q: I had three jobs last year and realize that with multiple deductions from my employers that I have paid more of certain taxes than I am required to. I know how to make a claim for excess Social Security withholding, but what about State Disability Insurance? Are overpayments refundable? --R.D.

A: Go to Line 41 on your California Form 540 tax return. It is labeled "excess California SDI withheld." The number you fill in that blank is added to your other withheld taxes and either reduces the amount you owe the state or increases the refund the state owes you. Other taxpayers might be interested to know that they should go to line 58 of the federal 1040 tax return to list the excess Social Security taxes withheld from their paychecks. Again, your overpayment will either reduce the amount you owe or increase the size of your refund.

A Credit Card With Lower Interest Rates

Q: The credit cards I have from my bank charge high interest rates. Where can I find a card that charges a lower rate? --J.R.T.

A: Bankcard Holders of America is your best bet. This nonprofit organization publishes a report detailing the interest rates and annual fees charged by many (but not all) credit card issuers in the United States. Each pamphlet costs $4 and is available by writing Bankcard Holders of America, 560 Herndon Parkway, Suite 120, Herndon, Va., 22070.

After You've Gone, Who Gets Your IRA?

Q: Can an individual retirement account of a deceased person be rolled over into the IRA of a spouse or heir and still keep its tax-deferred status? --R.J.A.

A: In general, yes; the IRA funds of a deceased can continue receiving favorable tax-deferral even if the funds have been left to another. However, the rules are different depending on who is getting the deceased's IRA and whether the deceased had already begun making withdrawals.

According to Thomas Gau, a Torrance financial planner, a surviving spouse may transfer the funds into his or her account and continue deferring taxes until he or she reaches age 70 1/2. Then, as with all IRA accounts, mandatory withdrawals begin.

A non-spouse inheriting is covered by different rules. If the deceased had not yet begun making withdrawals from the account, the beneficiary can make one of two choices: Either he or she can wait until Dec. 31 of the fifth year following the deceased's death to take out the entire amount, and pay the appropriate taxes; or he or she can take annual distributions from the account over his or her entire life expectancy, paying taxes on the funds each year. If, however, the deceased had begun taking distributions from the account, the remaining balance must be distributed in the same fashion as the deceased had been using. At no time may a non-spouse transfer any part of a deceased's IRA to his or her own account.

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