To borrow, or not to borrow, from an annuity

Q I'm 50 and have a $60,000 home-equity loan at 8 percent interest, which I used for college expenses. I also have a $250,000 TSA (tax-sheltered annuity), earning, on average, 8 percent annually. My TSA allows me to borrow from it and charges a 3 percent annual administrative fee on the outstanding balance. When does it make sense financially to borrow from my TSA to pay off the home-equity loan? My plan is to repay the TSA with what I have been paying regularly on the equity loan.

J.K., via e-mail

A "If your monthly cash flow is a problem, keep the home-equity loan. If cash flow is not a problem, go with the TSA," says David Bendix, president of Bendix Financial Group, Garden City, N.Y.

Here's why: With a home-equity loan, you can stretch your payments over as many as 30 years. By contrast, says Mr. Bendix, most TSA plans require a much shorter payback period, such as five years, so your monthly payments would be larger.

He adds that, depending on your tax bracket, up to one-third of the costs associated with a home-equity loan are tax deductible. So your actual loan rate is somewhere around 5 percent, not 8 percent, Bendix says.

Yet that rate is still higher than the TSA's 3 percent payback rate. So assuming cash flow is not a challenge, you will come out ahead by borrowing from the TSA, Bendix reckons. And since you are 50, you should have a good decade or so to rebuild the TSA before you retire.

Q My husband has about $3,200 in a profit-sharing plan with a previous employer which he needs to roll over into an IRA. The only two companies that I know of to handle this are Fidelity and Vanguard. We sent an application to Fidelity, but they threw it out and we needed to complete the paperwork again. I phoned Vanguard, but have received no application. Who else can I contact to roll over this money?

M.C., Lubbock, Texas

A A Fidelity spokesman says that if an application is incomplete or improperly filled out, the company will pinpoint the problem and help the customer fill out a proper form. Fidelity can be reached at 800-544-5650. They also have seven branch offices in Texas, including Dallas.

If you still have trouble, Bendix says contact another major fund company, such as T. Rowe Price (800-638-5660) or Invesco (800-752-6342).

Questions about finances?


Guy Halverson

The Christian Science Monitor

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