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v TUESDAY,
JULY 22, 2003
Chris Kinnas
Investment Advice
Are Variable
Annuities
Right for
You?
To save the money you’ll need
for that comfortable retirement
you’ve been working toward,
your best move is to contribute
as much as you can afford to
your 401(k) and IRA. But what
happens if you hit the contribu
tion limits on these two plans?
What other investments are
there for you?
One possibility is a variable
annuity. However, before you
purchase one, review the posi
tives and the negatives -
because they’re both present.
Let’s look at some of the key
benefits of a variable annuity:
• Variety of investment choic
es - Your variable annuity is
made up of several separate
investment sub-accounts.
Typically, these sub-accounts
have different objectives -
aggressive growth, growth-and
income, income, etc. You can
divide your investment dollars
among these sub-accounts to
create a diversified portfolio.
• Tax-deferred earnings -
You’ll pay no taxes on your vari
able annuity’s earnings and
income until you start making
withdrawals, typically when
you’re retired. Consequently,
your money will grow faster
than it would if placed in an
investment on which you paid
taxes each year.
• Guaranteed death benefit -
If you die before you’ve started
taking withdrawals from your
variable annuity, your benefici
ary is guaranteed to receive a
specified amount; at a mini
mum, this will be the amount of
your purchase payments. Keep
in mind, though, that guaran
tees on annuities are backed by
the claims-paying ability of the
issuing insurance company.
• Flexible withdrawal options
- You generally have a number
of ways in which you can take
withdrawals from your annuity.
You can set up a stream of
income that you - or you and
your spouse - can’t outlive, or
you can choose to take the
money over a certain number of
years.
As you can see, a variable
annuity does offer some attrac
tive features for anyone inter
ested in saving money for
retirement. But, as is always
the case in the investment
world, there is more than one
side to the variable annuity
story. So, consider some of the
potential drawbacks:
• Investment risk - The word
“variable” means what it says:
The value of your annuity can,
and will, go up and down, based
on the performance of your
underlying investments. If
these investments are of high
quality, and you hold them for
many years, you have a good
chance of achieving exceptional
growth - but there’s no guaran
tee that your principal will
increase, or even be preserved.
• Surrender charges - If you
need to tap into your variable
annuity within a few years of
purchasing it (typically, six to
eight years), you may well have
to pay a surrender charge,
which declines gradually over
time. However, some annuity
contracts allow you to with
draw a small percentage of your
account value each year, free of
surrender charges. And others,
such as “A” shares, incur no
surrender charges.
See KIN NAS, page 7A
The young and the 401 K-less
Local financial
advisors urge people
to put their money
to work for them
By Luci Joullian
HHJ Staff Writer
Twentysomethings typically
aren’t the most frugal, finan
cially responsible bunch, and
retirement can seem like a dis
tant, abstract goal to a 25-year
old, but investment profession
als agree that the earlier you
start socking away cash, the far
ther ahead you are on the road
to financial freedom.
The simple fact is, the earlier
a person starts investing,
through the magic of com
pounding interest, the less
money they will have to ulti
mately save to make the same
amount as someone who starts
investing later.
“Time is your biggest ally,
because you’ve got to have time
for your money to work for
you,” said Skip Malcolm, a
financial advisor with Edward
Jones Investments in Warner
Robins.
For example, a 15-year-old
who saves $2,000 a year for
seven years and then invests
the money in an account with
an 8 percent return will have
more than $1 million at age 65.
A 25-year-old could reach $1
million by saving $2,259 a year
for 40 years. A 45-year-old
would have to save $17,459 a
year for 20 years to reach the
same goal.
Better now than later
“It’s a fantasy that people
have that they are going to be
able to save money later in their
lives,” said Chris Kinnas, with
Edward Jones’ Perry office.
“People in their 20s think that
they will have more money later
on, but they get married, have
kids and buy a house - and all
that takes more money.”
“People have the misconcep-
Hammock designated
Certified Senior Advisor
WARNER ROBINS - R.
Leslie Hammock, owner of
Capital Planning, has success
fully completed a comprehen
sive course and exam conducted
by the Society of Certified
Senior Advisors and has
obtained the designation of
Certified Senior Advisor.
As a CSA, he will assist his
WR Art Association opens new shop
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The Warner Robins Area Chamber of Commerce hosted a ribbon cutting ceremony recent
ly celebrating the grand opening of the Warner Robins Art Association gift shop in the
Galleria Mall in Centerville. The gift shop will display various paintings and crafts from local
artists.
Bell South takes highest ranking in customer satisfaction
Special to the HHJ
ATLANTA - Bell South
(NYSE: BLS) has received the
highest ranking in J.D. Power
and Associates 2003 Local
Residential Telephone Service
Study in the Southeast Region,
giving Bell South its third
straight highest ranking in
major independent customer
satisfaction studies of local
phone service.
In the J.D. Power and
Associates regional study,
Bell South ranked highest over
Business
tion that you need a large sum
of money to get started,” said
Malcolm, adding that people
may begin by investing even
S2O or S3O a month.
This can be difficult though
for young adults who have little
experience budgeting their
money or delaying immediate
financial gratification.
“The biggest mistake that
people in their 20s make is that
they go buy a car,” said Tony
Toombs, financial advisor with
Raymond James Financial
Services in Warner Robins.
“Honestly my biggest competi
tor for young clients is Eddie
Wiggins and Wal-Mart. If some
one in their early 20s gets their
hands on some extra cash, nine
times out of ten they will spend
it rather than invest it.”
“There’s no big secret - you
just need to spend less than you
make and invest the differ
ence,” Kinnas said.
The question is, once they
begin to build up a nest egg,
where does a young person need
to invest their savings?
First things first
“Before you invest a dime,
you should have some emer
gency cash,” said Kinnas, who
recommends about six months’
salary in something liquid, like
a money market account. And
sometimes, paying off debt -
depending on the type of debt,
the interest rate and whether it
is tax deductible - is also impor
tant before starting a savings or
investment plan. Although
most people wouldn’t think of
paying off their credit card as
adding money to their pockets,
Toombs points out that if you
are paying the minimum every
month on a credit card with,
say, an 18 percent interest rate,
and investing money that is
earning a 10 percent annual
return, you are essentially get
ting a negative 8 percent return
on your money.
“All debt is not bad, though,”
points out Malcolm, citing home
BUSINESS PEOPLE
■K
clients with
special issues
affecting sen
iors, such as
long-term
care and
retirement
distribution
planning, in
addition to I
the other finan
cial and estate
HAMMOCK
planning services offered by his
all and highest in all six major
factors of the study: company
image, customer service, per
formance and reliability, billing,
cost of service, and offerings
and promotions. Of those, cus
tomers ranked Bell South signif
icantly high in the image factor,
noting its reputation for
dependability and expertise.
In addition to the highest
ranking in the J.D. Power and
Associates study, Bell South
ranked No. 1 in these major
independent studies of local
phone service:
mortgages as an example.
When a young person is final
ly ready to start investing, the
first step is to take advantage of
a company-sponsored 40 IK
plan, if it is offered.
“That’s the real tragedy,”
Kinnas said. “That a lot of
young people don’t take advan
tage of their company-spon
sored plans, because it’s like
getting free money.”
And if you do take advantage
of an employer-sponsored
retirement plan and then
change jobs, make sure you roll
over the balance instead of
cashing out. With taxes and
penalties, you might only actu
ally receive 70 cents on each
dollar, Kinnas cautioned.
After at least making the min
imum contribution to your
40IK, a Roth IRA is probably a
good idea, Malcolm said. The
money deposited in a Roth IRA,
if left untouched until retire
ment, is never directly taxed.
It’s a bit of a tradeoff from a
regular IRA because you don’t
get an income tax deduction
when you make the contribu
tion, but the tax-free com
pounding over the years makes
the tradeoff worthwhile. The
yearly limit for contributions to
a Roth IRA is $3,000.
Putting stock
in investments
And with the post-September
11 stock market plunge, many
twentysomethings just starting
to invest may be wary of putting
their money on the market at
all. Malcolm, who recommends
a portfolio of well-diversified
mutual funds, said this is a mis
take.
“A lot of young people haven’t
every experienced both a bull
market and a bear market and
they stop putting money in
when the market is down,” said
Malcolm, who noted that it’s
not wise to continually dwell on
the performance of your invest
See FINANCIAL, page 7A
firm.
Additionally, Hammock has
just returned from the annual
meeting of the Million Dollar
Round Table, of which he is a
Life, Qualifying and Honor Roll
member. In any given year, less
than 6 percent of all life insur
ance representatives attain
membership in the MDRT, rec
ognized as the standard of
excellence in the life insurance
industry.
- From staff reports
• American Customer
Satisfaction Index, Local
Telecommunications Industry
Group, conducted by the
National Quality Research
Center at University of
Michigan’s Business School,
May 2003 (for the 10th straight
year).
• Yankee Group’s
Technologically Advanced
Family (TAF®) survey of satis
faction with local phone service,
December 2002 (for the second
straight year).
Evaluating
obstacles and risks
For the past two weeks, my
columns have dealt with
obstacles to achieving your
dreams. Today we continue
that theme.
We all have expectations,
and we don’t like unforeseen
or objectionable disruptions.
Yet your mind can generate
all kinds of potential risks and
limitations. These “what if”
possibilities may cause you to
fear, doubt, worry, or just feel
anxious. To protect yourself
from what might happen, you
may be tempted to forego
stepping out in faith, choosing
instead the known, the safe,
and the predictable.
I think more of us should
GO FOR IT! Here’s a simple
procedure that can build your
confidence next time you have
your sights set on high expec
tations.
Having a friend or colleague
(or a good coach) who is good
at listening and empathizing
will help you through these
steps the first couple of times
you use this process.
First, get clear on the
desired outcome of your activ
ity, event, or opportunity.
Take a piece of paper and
write a positive description of
the beneficial outcome in the
center of the sheet.
Now, allow your brain to
dredge up anything that is of
concern to you. Surround the
desired outcome with brief
descriptions of the many fears
and obstacles you’ve been
thinking about. Take as much
time as you want to describe
the many risks and potential
problems. You can come back
later and add more concerns if
new ones occur to you.
Next, look at every obstacle
for its impact on the desired
outcome. If that barrier were
to occur in the worst possible
way, would its effect be low,
medium, or high? (Use a 1-
for-low and 5-for-high rating
system.) Be judicious - surely
not every threat deserves an
“end of the world” 5 rating.
After you’ve evaluated the
impact of each risk and barri
er, then rate each one again
(using the 1-for-low and 5-for
high rating scale), this time
assessing the probability of
each disaster’s likely occur
rence. Remember, be judi
cious - many of the risks and
obstacles we imagine never
happen!
Serving the Lord
-and His people
with gladness.
(478) 988-0237
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Dennis Hooper
.. . even greater things...
dhooper2@juno.cotn
The next step is to multiply
the two numbers for each bar
rier, obtaining a product rang
ing from 1 to 25. The higher
the number, the more atten
tion you should give to the
risk or obstacle.
You’ll want to focus your
attentions on the three or
four most significant limita
tions. Actions you take to
address these concerns will
likely lower the impact and
probability of the others as
well.
Now, give your brain per
mission to be creative!
Generate options for how you
might avoid or eliminate
these most significant obsta
cles, how you might reduce or
control what you can of each
risk, or how you might devel
op a contingency plan for han
dling the situations if they do
occur.
I’ve used this technique fre
quently over past weeks to
support clients in their aspi
rations. Each time we’ve been
able to acknowledge every
concern, yet also narrow the
field to fewer than 1/3 of the
issues that had been nagging
and constraining the individ
ual.
This process usually takes
less than 15 minutes, yet
brings peace of mind and
allows you to focus on what
you really can influence to
bring about the outcome you
desire. After you use it sever
al times, it generates great
confidence that you really can
handle whatever circum
stances might come along.
I thank my friend, Lyn
Christian, a colleague and
teacher of professional coach
es, for sharing this technique
with me. It’s simple, and it
works!
F. Dennis Hooper
Personal Coach and Collaborator
Consulting in the areas of
personal and leadership development.
Hooper and Friends, Inc.
PAGE 6A
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