Showing posts with label financial. Show all posts
Showing posts with label financial. Show all posts

Tuesday, April 5, 2011

Variable Annuity Vindication

Many of my clients have invested in the Transamerica and MetLife Variable Annuities over the years, so I wanted to refer you to an article in the Wall Street Journal about variable annuities and the Guaranteed Minimum Income Benefit. This rider protects the assets so your account will continue to grow in a down market. The following article by Leslie Scism sums up perfectly the reasons why the variable annuity should be a part of most investment portfolios, and vindicates many advisors who realized there was really no other comparable protection against downside risk.

Long Derided, This Investment Now Looks Wise

by Leslie Scism

One of the best investments of the past decade was one of the most derided: the variable annuity. But investors who want in on the action now are in for a shock, as the juiciest deals have disappeared from the market.

Variable annuities, a tax-advantaged investment account that holds a type of mutual fund, are sold by insurers, and most offer some form of investment guarantee for an additional fee. For years, they were attacked for being too expensive. Why pay for a guarantee to protect against a stock-market decline, the argument went, when stocks continued their inexorable march upward?

Then stocks plunged, and variable-annuity guarantees no longer looked expensive. In fact, insurers, in a move to build market share, had underpriced many of them. Suppose an investor owned a variable annuity that tanked in value last year. No matter. Under the most-generous contracts, insurers pledged to pay customers lifetime retirement income based on past market gains in their underlying funds, plus minimum annual increases in years the market is sluggish or down.

Because of such guarantees, many holders of variable annuities actually saw their accounts increase 6% or more in value last year, when the Standard & Poor’s 500-stock index dropped nearly 39%.

“When I watch friends bemoaning the market, I feel guilty saying anything, actually,” says Amy White, a 67-year-old retired accountant in Dallas. She and her late husband invested hundreds of thousands of dollars in variable annuities early this decade, and their funds rose as the market neared its 2007 peak. While they fell last year, the guaranteed amount—on which Ms. White’s retirement-income checks will be based—is still more than double the invested amount.

Click here to read the rest of the article

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John Kaighn

Jersey Benefits Advisors

The Kaighn Report

Monday, July 12, 2010

Jersey Benefits Advisors Newsletter Summer 2010

MARKET WATCH

The 4th of July holiday has come and gone as the mercury keeps rising incessantly, baking the East Coast in near record temperatures. I hope you were able to take advantage of the beautiful holiday weather and enjoy an outdoor activity or two. I was lucky enough to spend some time with my family at beach, and enjoyed my granddaughter as she frolicked in the sand and negotiated with the waves. She did quite well, until I managed to allow a rather small wave to splash up and hit her in the face. She didn’t like that very much! It reminded me of how I felt about the stock market’s performance prior to the holiday.

After a decent first quarter in 2010, some of the concerns we spoke about in the last quarter overwhelmed investors as the reality set in that this will not be a normal recovery, much as the recession we recently experienced was not typical. The countries of the European Union experienced their own debt crisis, with Greece being the poster child for fiscal mismanagement. Fear of a debt contagion from Europe undermined investor confidence and led to a major correction in the second quarter. The DJIA closed the quarter at 9,774.02, which leaves it at - 6.27% for the year. The Dow is now 12.8% lower than the April high, while the S&P 500 ended the quarter at 1,030.71 for a - 7.28% performance for the January to June period. The NASDAQ finished the quarter at 2,109.24 for a - 7.05% first half showing.

There are many debates raging about the significance of the second quarter drubbing. With the DJIA off 12.8% and the S&P 500 down over 15% from April, talk of the economy sinking back into recession, the dreaded double dip, has resurfaced. There is also much discussion about the American Recovery and Reinvestment Act of 2009. The huge stimulus bill hasn’t begun to create the jobs promised, as unemployment remains stubbornly high at 9.5% of the workforce. The major expansion of the government into healthcare, as well as the administration’s promise to push through a cap on carbon emissions, in their response to the BP fiasco in the Gulf of Mexico, has left many Americans wary of the Big Government goals of this Congress. In fact it has led Barron’s, in July 5th issue, to call for major losses for the Democrats in November, and an end of the Big Government agenda.

While the effectiveness of government stimulus will be debated ad infinitum, the fact of the matter is something had to be done to stabilize the economy. The promise of it being a “job creation machine for shovel ready projects” created unrealistic expectations. As can be witnessed by this tepid expansion, stimulating an economy as multifaceted as ours is no small endeavor. It takes a great deal of time for the effects of government spending to be felt, and when it is targeted to technologies which are the pet projects of politicians, the effects can be minimal, and can have some unintended consequences.

So, if in fact Barron’s is correct and we wind up with a stalemate in Congress after November and the inability to push through Cap and Trade legislation, we may actually be better off. While the search for alternative and renewable fuels is certainly in our best interest as a country, to deny the role of fossil fuels in our immediate and long term future is tantamount to utter deception. As for the double dip recession, with all of the stimulus thrown at the economy, it seems unlikely. We will probably continue to expand slowly, but unemployment will likely remain uncomfortably high.

ARE YOU TAKING ADVANTAGE OF THIS BUYING OPPORTUNITY?

It seems like the markets have been on a wild, rollercoaster ride lately. Even portfolios with state of the art diversification have gyrated significantly over the last two years. I realize it gets difficult to stay the course, when there is so much opinion and information bombarding you on a daily basis. Yet, more than ever, I believe these volatile times present a wonderful opportunity to systematically add to your portfolio. It is really not enough to just hold onto your investments, because it is equally important to continually purchase shares to take advantage of lower prices when they become available. This trading range will not last forever, and there will be a point when the markets recognize the expansion is for real, and the buying opportunity will be gone.

PRIVACY POLICY & FINANCIAL REFORM

PRIVACY POLICY

At Jersey Benefits Advisors and Jersey Benefits Group, Inc. protecting your privacy is very important to us. We want you to understand what information we collect and how we use it. We collect and use information from you on applications and other forms as well as information about financial transactions with us and from non-affiliated third parties. This “nonpublic personal information” is obtained in connection with providing a financial product or service to you.

We do not disclose any nonpublic personal information about you without your express consent, except as permitted by law. We may disclose the nonpublic personal information we collect to persons or companies that perform services on our behalf.

We restrict access to your nonpublic personal information and only allow disclosures to persons and companies as permitted by law to assist in providing products or services to you.

We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information at all times.


FINANCIAL REFORM

Legislation may be signed into law this summer, billed as reform of the financial system, to prevent a calamity similar to the 2008 financial crisis. Unfortunately, there is no provision in the legislation about what to do with Fannie Mae and Freddie Mac, the two entities many feel are at the root of the housing crash. While consumer protection is a worthwhile goal and regulations are certainly important in order to reign in those who are corrupt, this particular bill is too little, too late, and fails to recognize the government’s complicit role in the housing bubble. Enjoy your summer!

COMPANY INFORMATION:

Investment Advisory Services offered through:
Jersey Benefits Advisors
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com

Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
34 Doe Dr.
Woodbine, NJ 0870
800-245-8250
Member FINRA & SIPC

Third Party Administration and Insurance Services offered through:
Jersey Benefits Group, Inc
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/

All opinions expressed in this newsletter are solely those of John Kaighn & Jersey Benefits Advisors, formerly known as Kaighn Financial Services.

Sunday, November 22, 2009

Education Department to Demand School Pay Data

By Stephen Sawchuk

U.S. Department of Education officials plan to require districts receiving economic-stimulus aid to report school-level salaries—a sign, observers say, that the Obama administration might seek key changes to district accounting procedures for federal Title I funds.

The reporting—the first collection of its type undertaken by the federal government—could give a clearer picture about the extent to which district spending on salaries differs between schools that receive Title I dollars for disadvantaged students and those that do not.

The results of the data collection, which is to take place this winter, are likely to give more ammunition to school finance experts and lawmakers who maintain that the Elementary and Secondary Education Act should be changed to require districts to address such disparities before receiving the federal aid.

Because a majority of districts’ costs are tied up in salaries, the data have implications for the way teachers of different levels of pay and experience are distributed across districts.

“We’ve never had a moment before when public officials have asked questions about these inequities,” said Marguerite J. Roza, a research associate professor at the University of Washington, in Seattle, who has studied the issue extensively. “Many districts swear that they don’t have them. But they haven’t looked.”
Teacher Distribution

A little-noticed provision in the American Recovery and Reinvestment Act requires each district receiving Title I funds under the stimulus law to file with its state a school-by-school listing of per-pupil expenditures by December 2009.

Aside from a brief notice in the Federal Register, the Education Department has been silent about what information it would seek from districts to fulfill the requirement. But according to forms filed by the department with the White House Office of Management and Budget over the past two months, the Education Department indicated that it plans to require districts to report information on wages, including:
Total salaries in each school;

• Salaries of instructional staff (such as paraprofessionals) only;

• Salaries of teachers only; and

• Nonpersonnel expenditures, if available.

The department would also request more detailed information from five states yet to be chosen. Those states would be asked to break down the expenditure information by state, local, and federal funding sources, including Title I, the documents indicate.

The heavy emphasis on teachers’ salaries stands in direct contrast to the way that districts currently account for them under the Title I program, which provides additional money to districts with high concentrations of poor students.

To receive the federal funding, districts must meet three financial requirements meant to prevent them from using the extra federal dollars to fill in gaps in state and local funding. Under the “comparability” provisions, districts must show that they provide equitable state and local resources to low- and high-poverty schools before receiving their Title I allocations.

But the current version of the ESEA allows districts to exclude salary differentials from the calculation. Instead, they can allocate money to schools based on the district’s average teacher pay as set out in the districtwide salary schedule.

Researchers such as Ms. Roza have found significant funding disparities between low- and high-poverty schools in the same district, largely as a result of differences in teacher salaries. She contends that the omission of salaries from the comparability language papers over factors, such as transfer rules in contracts and high turnover in low-income schools, that tend to lead to a concentration of lower-paid novice teachers in those schools.

In their documentation to the OMB, department officials wrote that the findings from the data collection could be used to help policymakers craft changes to the comparability provisions in the ESEA.

“This is the only way to truly measure whether resources around teacher salaries, curriculum, and technology are being equitably distributed to schools and classrooms,” said Charles Barone, the director of federal policy for Democrats for Education Reform, a New York City-based political action committee. “Districtwide figures obscure resource differences, which is the key reason why most districts refuse to publish school-by-school dollar figures.”

Raegen Miller, a senior policy analyst at the Center for American Progress, a Washington think tank headed by a former Clinton White House official, praised the department’s efforts in the five states that would be chosen for the more detailed reporting, saying such scrutiny could intensify the focus on putting performance at the center of school policy.

“A lot of people think that some amount of budgetary discretion should reside in the hands of principals, that there should be some more flexibility about how teachers are compensated,” he said. “That depends on knowing how much money is flowing to the schools and whether outcomes are measured.”

But the documents show that state officials approached about the collection have expressed concerns about the burden and cost, as well as its feasibility.

“We also understand that districts may not have comprehensive data on school-level expenditures that they can report for a previous school year, but we believe that, at a minimum, they should be able to identify which staff were assigned to each school and to determine the salary expenditures for each school staff member,” Sandra Abrevaya, a spokeswoman for the Education Department, said in an e-mail.
Closing ‘Loopholes’

Although the Obama administration has not made any public statements about the comparability language, several experts on the issue now work in the administration.

A former Center for American Progress analyst, Robert Gordon, and Russlynn Ali, a former vice president of the Education Trust West, an advocacy group, work, respectively, at the OMB and in the Education Department’s office for civil rights. Both pressed for changes to the Title I comparability provisions in their prior roles.

Such changes could, for instance, require districts to account for actual, rather than average, teacher salaries in determining whether state and local funds are distributed comparably to Title I schools.

Any such alterations would require congressional approval, and that could well be difficult.

When the House Education and Labor Committee, in 2007, issued a discussion draft of a bill to reauthorize the ESEA—currently the No Child Left Behind Act—that proposed accounting for actual teacher salaries, comparability became a surprise hot-button issue. ("Draft Proposal Seeks to Equalize School Resources," Sept. 19, 2007.)

Teachers’ unions opposed the proposal, fearing it would cause districts to try to override contracts and transfer teachers forcibly to equalize salaries.

The National Conference of State Legislatures and the American Association of School Administrators argued that the change would interfere with state funding formulas and district budget flexibility.

But Ms. Roza contends that closing the comparability “loophole” would not necessarily require transferring teachers. Districts couldmake up for lower teacher salaries in high-poverty schools, she says, by spending more to hire instructional coaches for those schools, creating incentives for teachers to move to them, or reducing class sizes.

Neither the American Federation of Teachers nor the National Education Association returned requests seeking comment on the new data collection.

For their part, lawmakers are not likely to take up comparability before turning their attention again to the ESEA, which is overdue for reauthorization. But they still have their sights set on the provision.

“I think you have to [make changes],” said Rep. George Miller, D-Calif., the chairman of the Education and Labor Committee, when asked about comparability following a recent hearing on ensuring equitable access to teachers.

“We assume that there is equal funding across the district so that these [Title I] dollars go to schools impacted by heavy concentrations of poor and minority students,” he continued. “But if those resources are siphoned off, that purpose of federal law is not being met.”

Education Week
Vol. 29, Issue 12, Pages 15,17