To the Editor: Your pension columnist Joel Frank is expert on the rules and regulations of IRA/pension fund investing. I am compelled, however, as I did in my Letter to the Editor of July 18, 2016, to criticize his recommendation in his Aug. 9 column, to surrender a 7 percent or 8 ¼ percent tax-deferred guaranteed investment.
He does so “because the 7 or 8.25 percent return is not yours. It must be shared by the tax collectors at an unknowable income-tax rate you have agreed to pay, years if not decades from now.”
Denigrating tax-deferred investments per se is not the norm.
Also, no conceivable future tax rate could reduce the after-tax return on a 7%—8 ¼% guaranteed tax deferred (i.e. including compounded interest on dollars not yet paid in taxes) to that of the much lower returns now available elsewhere on comparable investments, of which there are none, even if not taxed.
Ten-year United States treasury bonds, for example, now yield about 1½ percent and require a 10-year maturity commitment or possible capital loss should interest rates rise. Many stock-market gurus do not even forecast the risky stock market, or a managed diversified stock portfolio, to produce 7%- 8 ¼% returns from current levels.
I say there are no comparable investments, because the holder of the 7%—8 ¼% guaranteed tax-deferred investment has the option, at her sole discretion, to change its maturity date at any time to any time, from as long as she wants to immediate, without incurring any maturity or market risk.
How good is that? Well, I know a veteran IRA/pension fund adviser who said it was “scandalous” because it was unfair to others who did not negotiate such a great pension-fund investment option. I commend and thank those union negotiators.
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