Dear Mr. Berko:

I’m employed by Alachua County School System, where I have had a 403(b) account for six years. My payroll deduction is $200 a month for 10 months a year, and so far I have contributed $12,000. I plan to work another 22 years, till I’m 67. Since I began my participation, I have earned 3.6 percent in interest for a total of $1,607.71, and my account is worth $13,607.71. Do you think this is a good return? Can I do better?

I’m thinking that I should stop making payments to this “flexible premium deferred annuity,” which is issued by ING/USA Annuity and Life Insurance Co., and put the money in something else that has a better chance to grow. Please tell me what you think I should do.

There are other employees who know that I am writing you, and they also want to have your advice. I’ve tried to get information from the bosses, but they seem to avoid answering my questions.

G.M., Gainesville, Fla.

Dear G.M.:

That ING/USA Flexible Premium Annuity issued by ING/USA Annuity and Life Insurance Co., in my opinion, ain’t worth a pail of night soil. Please note the following:

1. This “el stinko” policy doesn’t earn 3.6 percent; according to your last statement, it earns 3.4 percent. My good friend Charlie “Chickenfoot” Goldberg just got 5.7 percent for a one-year certificate of deposit, and his bank is only a few miles from your home.

2. The cash surrender value of that junky investment is $11,383.02 — you can’t get all your money back. If you ask ING/USA to cash you out, you’ll lose $1,117 in principal and $1,607 in interest. That’s a rip-off. Chickenfoot tells me his bank will give him all his money back plus all the interest he earned if he cashes his CD early.

3. Do you and your colleagues have any idea how many commission dollars you folks pay when Alachua County sucks $200 from your paycheck every month and sends it to ING/USA? Most annuities have an upfront commission cost of between 2 percent and 12 percent. Now the fellow who sold this thing to you certainly doesn’t work for the Salvation Army, so he’s probably getting paid pretty well for his political connections to the school board. Because this is your money, you have a personal obligation to know how much cash you’re paying for this trash. Charlie tells me that he didn’t pay a penny of commission when he bought his CDs paying 5.7 percent.

4. ING/USA Annuity and Life Insurance Co., home-ported in Des Moines, makes a pretty penny on this policy of yours, too. I don’t know what the lads at ING/USA charge you for fees and services, but they have some pretty fancy digs and those offices aren’t a gift from the Bill & Melinda Gates Foundation. Also, the winters get mighty cold there, so ING/USA’s heating bills could probably warm the hearths of several thousand families each year. That money and money to pay the company’s officers, directors, lawyers, accountants, pension plans, travel costs, etc., comes from your annual annuity fees.

I don’t know a single member of the Alachua County School Board, but there are only two reasons they could recommend such a lousy investment to their employees. The first reason that comes to mind is stupidity. The second reason is so outlandish that I don’t even want to think about it.

If the school board’s rules permit you to turn this trash to cash, do it and move the proceeds to an Individual Retirement Account. If the school board’s rules don’t permit you to move the money to an IRA, then I recommend that you stop all contributions, open a Roth IRA and fund it to the max.

Certainly CDs will provide you better returns than ING/USA’s 3.4 percent. And Vanguard has some excellent no-load, low-fee mutual funds that have superb long-term records. Heck, even Vanguard’s money market account pays more than the paltry interest rate you get from ING/USA.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.

© Copley News Service