Purchasing MYGAs (multi year guaranteed annuities) - mega thread

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BarbK
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by BarbK »

IowaFarmBoy wrote: Thu Aug 11, 2022 1:13 pm
indexfundfan wrote: Thu Aug 11, 2022 1:05 pm I looked at the W&S MYGA on Blueprint. It should allow for 10% penalty-free withdrawal each policy year. Not sure why it was denied, unless the policy you bought was a different one.

And yes, according to the brochure below, the "one year renewal period" happens after the policy has reached maturity.

https://public-static-content.blueprint ... ochure.PDF
I think the issue was that I wanted to transfer it back to my IRA. If I had just wanted a check, I think it would have gone through.

Their exact phrasing for the denial was " You may only make a Partial Exchange if your Account Value is currently in the One-Year Renewal Period."
That's interesting. Hopefully you only did 3 yr ones so they will be matured soon.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by discman017 »

Stinky wrote: Wed Aug 10, 2022 7:59 pmAs demonstrated upthread, the value of the surrender charge waiver if the beneficiary is not the spouse is very small - well less than the 0.10% cost for the rider to waive it.
I calculated that the rider was overpriced for me (mid-40s, pretty healthy). On the other hand, someone much older or with a serious health condition would have a much higher probability of dying during the contract term. The 0.10% cost could be a good deal for them.

For a 90-year-old in a nursing home trying to maximize their kids' inheritance, a MYGA could be a great option, especially in a more typical interest rate environment where short rates are much lower than long rates. Maybe you only live 2 or 3 years, but you get the rate for the 7-year contract during that time and then pass along the full accumulated value to heirs.

All this stuff is pretty morbid to think about. Just wanted to point out that when a death benefit rider has a fixed cost, independent of actuarial tables, it doesn't necessarily benefit the house over the gambler. Vegas casinos definitely wouldn't price their games this way, independent of probabilities. But insurance companies apparently do, so an investor who does the math can take advantage.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

Boglehead member Zosima posted a link to the AM Best website for Puritan Life that contains a useful "default chart" for insurers, based on both rating category and time since rating. See page 6 of this link (free registration required): https://ratings.ambest.com/DisclosurePD ... MBNum=7358

Note that the an insurer "default" does not imply a loss to the policyholder in the same magnitude. Many policyholders recover all of their money from a "defaulting" insurer, but there may be delays in recovering all funds. Absent total theft and/or fraud by the employees or owners of the insurer, the insurer will have some funds available to it to satisfy immediate claims. And insurance guaranty funds will kick in over time to compensate policyholders up to the guaranty fund limit.

In general, the higher the rating of the life insurer, the lower the MYGA rate is. But there are numerous exceptions to the rule. Individuals need to consider their risk/return tolerance as they consider which company to purchase from, and for what term.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by prozario01 »

Stinky - on that other thread, i also found that Comdex ranking very useful. I just read this thread few weeks back and was researching MYGA and ratings. That comdex link/PDF that was posted, lists all agency ratings (if any).

I was specifically interested in Aspida - following the blueprint link, and seeing that was offering the highest rates.

Asipida is near the bottom at #193 with a rating of Comdex rating 59. That gave me a pause - i probably would be more comfortable taking a lower interest rate in exchange for higher rating.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

prozario01 wrote: Mon Aug 15, 2022 2:20 pm Stinky - on that other thread, i also found that Comdex ranking very useful. I just read this thread few weeks back and was researching MYGA and ratings. That comdex link/PDF that was posted, lists all agency ratings (if any).

I was specifically interested in Aspida - following the blueprint link, and seeing that was offering the highest rates.

Asipida is near the bottom at #193 with a rating of Comdex rating 59. That gave me a pause - i probably would be more comfortable taking a lower interest rate in exchange for higher rating.
Good point. Here's a link to the Comdex rating from Stan the Annuity Man's website. https://www.stantheannuityman.com/comdex-rankings

And here's the comment that I just posted in the other thread about AM Best versus other ratings, specifically about Aspida but applicable to all companies.

AM Best has made a business of rating insurance companies for many decades. Virtually every life insurance company has a rating from AM Best - even the smallest and newest. And AM Best does very little rating work outside of the insurance space.

By contrast, the three general major rating agencies (S&P, Moody's, and Fitch) have been in business for many decades, but only rating insurance companies since about the 1980's. Most of the life insurers rated by those three agencies are pretty large, mature companies.

Historically, many life insurers who sell in "retail" markets have been able to get adequate market penetration with only an AM Best rating. They haven't needed ratings from the three major agencies to help them peddle their products, and so they haven't engaged the major rating agencies to rate them. By doing so, those "retail" insurers also avoid the rating agency fees, which run into six figures annually for each of the rating agencies. There are a number of annuity companies that fall into this category.

By contrast, many companies that sell in more "advanced" markets find that they need ratings from the major agencies to compete effectively. "Advanced" markets might include things such as large permanent life insurance policies, variable life and annuities, guaranteed investment contracts, structured notes, etc. Also, if a life insurance holding company issues public debt that is rated by the major agencies, it's likely that the underlying life insurance company will be rated.

In the case of Aspida, it's essentially a start-up life insurance company, built on top of an existing base of legacy insurance policies. A new management team has come in to start up the annuity business, and they're getting attention in the market by offering very attractive credited rates. Whether or not they will continue to be a market leader in interest rates remains to be seen. They received their A- rating from Best only last April. At $2 billion in assets, they're not a large company by any stretch of the imagination. I wouldn't expect that they'd seek a rating from the major rating agencies for a while to come.

Hope this helps in your decision process. I have some degree of personal confidence in the AM Best rating process, but wouldn't criticize anyone who chose to not purchase from such a young, smallish, and narrowly-rated company.
Last edited by Stinky on Mon Aug 15, 2022 2:59 pm, edited 1 time in total.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by discman017 »

prozario01 wrote: Mon Aug 15, 2022 2:20 pm Asipida is near the bottom at #193 with a rating of Comdex rating 59.
Having just bought the Aspida MYGA, I appreciate your sharing these COMDEX ratings. I hadn't seen these before, and more information is definitely better.

Opening the PDF, I see that Aspida is #193 out of 739 insurers. That's the 74th percentile, close to the top quartile.

Also, even as I scroll down the list to the #300 to #400 range, the majority of the insurers are at least A- rated by AM Best.

As a new provider of annuities, there's a risk factor with Aspida. But I don't see anything in this report to indicate that its A- rating is inappropriate. And it definitely doesn't look like it's "near the bottom" of insurers.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by prozario01 »

dscnman - i meant ranked/ordered where comdex score was computed. Rest of the pages - that column is blank.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by prozario01 »

Stinky wrote: Mon Aug 15, 2022 2:41 pm
prozario01 wrote: Mon Aug 15, 2022 2:20 pm Stinky - on that other thread, i also found that Comdex ranking very useful. I just read this thread few weeks back and was researching MYGA and ratings. That comdex link/PDF that was posted, lists all agency ratings (if any).

I was specifically interested in Aspida - following the blueprint link, and seeing that was offering the highest rates.

Asipida is near the bottom at #193 with a rating of Comdex rating 59. That gave me a pause - i probably would be more comfortable taking a lower interest rate in exchange for higher rating.
Good point. Here's a link to the Comdex rating from Stan the Annuity Man's website. https://www.stantheannuityman.com/comdex-rankings

And here's the comment that I just posted in the other thread about AM Best versus other ratings, specifically about Aspida but applicable to all companies.

AM Best has made a business of rating insurance companies for many decades. Virtually every life insurance company has a rating from AM Best - even the smallest and newest. And AM Best does very little rating work outside of the insurance space.

By contrast, the three general major rating agencies (S&P, Moody's, and Fitch) have been in business for many decades, but only rating insurance companies since about the 1980's. Most of the life insurers rated by those three agencies are pretty large, mature companies.

Historically, many life insurers who sell in "retail" markets have been able to get adequate market penetration with only an AM Best rating. They haven't needed ratings from the three major agencies to help them peddle their products, and so they haven't engaged the major rating agencies to rate them. By doing so, those "retail" insurers also avoid the rating agency fees, which run into six figures annually for each of the rating agencies. There are a number of annuity companies that fall into this category.

By contrast, many companies that sell in more "advanced" markets find that they need ratings from the major agencies to compete effectively. "Advanced" markets might include things such as large permanent life insurance policies, variable life and annuities, guaranteed investment contracts, structured notes, etc. Also, if a life insurance holding company issues public debt that is rated by the major agencies, it's likely that the underlying life insurance company will be rated.

In the case of Aspida, it's essentially a start-up life insurance company, built on top of an existing base of legacy insurance policies. A new management team has come in to start up the annuity business, and they're getting attention in the market by offering very attractive credited rates. Whether or not they will continue to be a market leader in interest rates remains to be seen. They received their A- rating from Best only last April. At $2 billion in assets, they're not a large company by any stretch of the imagination. I wouldn't expect that they'd seek a rating from the major rating agencies for a while to come.

Hope this helps in your decision process. I have some degree of personal confidence in the AM Best rating process, but wouldn't criticize anyone who chose to not purchase from such a young, smallish, and narrowly-rated company.
Stinky - thanks - i didn't see this post. This explains why they don't have ratings from other agencies - basically not worth for them to spend all that money. I was wondering why the other ratings were missing from Aspida.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by discman017 »

prozario01 wrote: Mon Aug 15, 2022 3:18 pm dscnman - i meant ranked/ordered where comdex score was computed. Rest of the pages - that column is blank.
Ah, thanks, I see that now. So only the top 30% of insurers get COMDEX ratings, and Aspida is towards the bottom of the top 30%.

FWIW, Guggenheim (Gainbridge) is ranked #226, and doesn't have a COMDEX rating.

Oceanview, another AM Best A- insurer that had the highest rates a couple months ago, is #248 and also doesn't have a COMDEX rating.

Now, all of these rankings are out of 739, so even Oceanview is right around the top third.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by prozario01 »

discman017 wrote: Mon Aug 15, 2022 5:39 pm
prozario01 wrote: Mon Aug 15, 2022 3:18 pm dscnman - i meant ranked/ordered where comdex score was computed. Rest of the pages - that column is blank.
Ah, thanks, I see that now. So only the top 30% of insurers get COMDEX ratings, and Aspida is towards the bottom of the top 30%.

FWIW, Guggenheim (Gainbridge) is ranked #226, and doesn't have a COMDEX rating.

Oceanview, another AM Best A- insurer that had the highest rates a couple months ago, is #248 and also doesn't have a COMDEX rating.

Now, all of these rankings are out of 739, so even Oceanview is right around the top third.
After reading how COMDEX ratinga is computed - you need to have at least 2 ratings done by bigger agency to be eligible - so the remaining one with blank does not mean they're necessary at the bottom - just they don't have at least 2 agency ratings, so score is not computed. I thik Aspidia had another rating by Fitch - i saw it somewhere googling them.

Another component i noticed with COMDEX, if you've to say A- with AMBEST, and a lot of other companies got A- or better - that lowers your score. Meaning, they value how "rare" that score is and that pushes you up in scoring. So company may remain same with A- but let's say one year 100 other corps scored A- with AMBEST, and nexts year 110 scored A- ... your COMDEX score will go down because lot of other peers have same score. It is bit strange that way - it is like, you've $1m dollar and you've a credit score of X, and next year, nothing changed for you - but lot of other people now have $1m - you're score will go down because of that.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by prozario01 »

General question about the state insurance - i know it is specific to state, and I'll have to research how it works in New Jersey.

In general, if it is a MYGA (fixed interest rate annuity) - let's say you put $100K and 5 years later, your interest should be $30K - and you have a 7-year contract. If the Insurance company fails - would state insurance generally cover $100K principal plus $30K interest? Or do they generally only cover the principal?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

prozario01 wrote: Tue Aug 16, 2022 10:07 am General question about the state insurance - i know it is specific to state, and I'll have to research how it works in New Jersey.

In general, if it is a MYGA (fixed interest rate annuity) - let's say you put $100K and 5 years later, your interest should be $30K - and you have a 7-year contract. If the Insurance company fails - would state insurance generally cover $100K principal plus $30K interest? Or do they generally only cover the principal?
They would generally cover the surrender value. Includes interest accrued to date, reduced by surrender charge. Don’t know if market value adjustment would be applied.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by prozario01 »

Stinky wrote: Tue Aug 16, 2022 10:31 am
prozario01 wrote: Tue Aug 16, 2022 10:07 am General question about the state insurance - i know it is specific to state, and I'll have to research how it works in New Jersey.

In general, if it is a MYGA (fixed interest rate annuity) - let's say you put $100K and 5 years later, your interest should be $30K - and you have a 7-year contract. If the Insurance company fails - would state insurance generally cover $100K principal plus $30K interest? Or do they generally only cover the principal?
They would generally cover the surrender value. Includes interest accrued to date, reduced by surrender charge. Don’t know if market value adjustment would be applied.
Got it. Thanks.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by prozario01 »

Stinky: One more question - is there any data showing how the rates were historical? For example, for 7 years - blueprithe shows highest rate right now is 4.8% with Aspidia. Is there way to check if histrically if 4.8% for 7 years is among higher end of rates or not? Would be nice to know if it ever gone above 5% or not.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

prozario01 wrote: Tue Aug 16, 2022 1:25 pm Stinky: One more question - is there any data showing how the rates were historical? For example, for 7 years - blueprithe shows highest rate right now is 4.8% with Aspidia. Is there way to check if histrically if 4.8% for 7 years is among higher end of rates or not? Would be nice to know if it ever gone above 5% or not.
Here’s a historical chart going back many years.

https://members.annuityratewatch.com/ra ... _rates.cfm
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by prozario01 »

Stinky wrote: Tue Aug 16, 2022 2:18 pm
prozario01 wrote: Tue Aug 16, 2022 1:25 pm Stinky: One more question - is there any data showing how the rates were historical? For example, for 7 years - blueprithe shows highest rate right now is 4.8% with Aspidia. Is there way to check if histrically if 4.8% for 7 years is among higher end of rates or not? Would be nice to know if it ever gone above 5% or not.
Here’s a historical chart going back many years.

https://members.annuityratewatch.com/ra ... _rates.cfm
Great thank you - this is very helpful. Just to get an idea - how today's rate compares historically. At a quick look, I see a higher average for 7 years is around 2006 (pre dot com meltdown). My take is - if I want to buy it, this is a very good time.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by krafty81 »

Locked in 4.40% (3 yrs) with Gainbridge a week ago. Schwab is sitting on the transfer still... :?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by relativeratio »

krafty81 wrote: Wed Aug 17, 2022 2:59 pm Locked in 4.40% (3 yrs) with Gainbridge a week ago. Schwab is sitting on the transfer still... :?
Sweet! :sharebeer

I would have liked to have done the same. There is still another option for those that have missed out: canvasannuity.com 4.6% B++
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by discman017 »

krafty81 wrote: Wed Aug 17, 2022 2:59 pm Locked in 4.40% (3 yrs) with Gainbridge a week ago. Schwab is sitting on the transfer still... :?
FWIW, in my household we've been buying the 6- and 7-year annuities. The Treasury yield curve is still downward-sloping in the 2- to 10-year range (3.28% for 2-year, 3.05% for 5-year, 2.90% for 10-year), so with longer MYGAs paying more than shorter MYGAs, you're getting much more of a premium over treasuries at the longer end of that range.

In other words, while 4.4% looks good now, investors are betting that it will look really, really good four or five years out. They could be wrong, of course, but that's what the money in the markets is predicting.

So if you have a long time horizon for needing the money, IMHO the Aspida 4.8% 7-year rate (or 4.5% with all the additional options) is still the best out there.

If you need the money in 3 years, though, 4.40% is a great rate for that timeframe.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by prozario01 »

Dont want to hijack this thread - but a slightly off-topic question. I had a former coworker selling investment products and just felt like had to throw in some business at him and had to buy something. As he lost is job and was trying to get into new career. So about 12 years ago i got AXA Retirement Cornerstone Annuity - it was too complex, and so I put in a minimum of $10K - now it has grown to $21K or so. I got to pull my hair to understand the details.

Should i be able to roll this/exchange into a MYGA? I'm assuming yes, but just double checking. On their website, didn't see any option for exchange/transferring to another annuity.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

prozario01 wrote: Thu Aug 18, 2022 9:35 am Dont want to hijack this thread - but a slightly off-topic question. I had a former coworker selling investment products and just felt like had to throw in some business at him and had to buy something. As he lost is job and was trying to get into new career. So about 12 years ago i got AXA Retirement Cornerstone Annuity - it was too complex, and so I put in a minimum of $10K - now it has grown to $21K or so. I got to pull my hair to understand the details.

Should i be able to roll this/exchange into a MYGA? I'm assuming yes, but just double checking. On their website, didn't see any option for exchange/transferring to another annuity.
Yes, you should be able to exchange this into a MYGA. In order to accomplish this, work with an agent (Blueprint Income, Annuity Advantage, etc) to get money “pulled” from the current variable annuity, rather than “pushing” from AXA to a new company.

It sounds like this is in a taxable account. If so, the basis will carry over, and you won’t have taxable income until you withdraw funds.

I believe that you’re making a wise choice in moving away from the AXA annuity. At age 12, it’s unlikely to have an surrender charges. And you’ll be saving the roughly 2-3% annual fees and excess costs on the AXA policy. All in all, a fine decision. :D

Post back with questions.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by prozario01 »

Stinky wrote: Thu Aug 18, 2022 10:14 am
prozario01 wrote: Thu Aug 18, 2022 9:35 am Dont want to hijack this thread - but a slightly off-topic question. I had a former coworker selling investment products and just felt like had to throw in some business at him and had to buy something. As he lost is job and was trying to get into new career. So about 12 years ago i got AXA Retirement Cornerstone Annuity - it was too complex, and so I put in a minimum of $10K - now it has grown to $21K or so. I got to pull my hair to understand the details.

Should i be able to roll this/exchange into a MYGA? I'm assuming yes, but just double checking. On their website, didn't see any option for exchange/transferring to another annuity.
Yes, you should be able to exchange this into a MYGA. In order to accomplish this, work with an agent (Blueprint Income, Annuity Advantage, etc) to get money “pulled” from the current variable annuity, rather than “pushing” from AXA to a new company.

It sounds like this is in a taxable account. If so, the basis will carry over, and you won’t have taxable income until you withdraw funds.

I believe that you’re making a wise choice in moving away from the AXA annuity. At age 12, it’s unlikely to have an surrender charges. And you’ll be saving the roughly 2-3% annual fees and excess costs on the AXA policy. All in all, a fine decision. :D

Post back with questions.
Many thanks for the advice. I was dreading calling AXA first - because I assume they wont be helpful if i ask how do i transfer it out. I'll work with the agent - that makes sense. Leaning toward blueprint so far - just very easy website to navigate.

Yes it is taxable - and not planning to withdraw until I retire. It is a small account - so will help get the feel for who the whole process works.

And many thanks for this thread - i heard about it here and there - but didn't fully understand this until i read your thread recently. Very timeline, as i also sold a house and thinking about what to do with the proceed - these rates are definitely very very attractive.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by krafty81 »

discman017 wrote: Wed Aug 17, 2022 4:35 pm
krafty81 wrote: Wed Aug 17, 2022 2:59 pm Locked in 4.40% (3 yrs) with Gainbridge a week ago. Schwab is sitting on the transfer still... :?
FWIW, in my household we've been buying the 6- and 7-year annuities. The Treasury yield curve is still downward-sloping in the 2- to 10-year range (3.28% for 2-year, 3.05% for 5-year, 2.90% for 10-year), so with longer MYGAs paying more than shorter MYGAs, you're getting much more of a premium over treasuries at the longer end of that range.

In other words, while 4.4% looks good now, investors are betting that it will look really, really good four or five years out. They could be wrong, of course, but that's what the money in the markets is predicting.

So if you have a long time horizon for needing the money, IMHO the Aspida 4.8% 7-year rate (or 4.5% with all the additional options) is still the best out there.

If you need the money in 3 years, though, 4.40% is a great rate for that timeframe.
Looks great but not available in my state!
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Post by krafty81 »

Has anyone used Canvas? Avail in my state and paying 4.6% for five years.
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Post by Stinky »

krafty81 wrote: Thu Aug 18, 2022 4:22 pm Has anyone used Canvas? Avail in my state and paying 4.6% for five years.
Yes, one purchase about 18 months ago.

I’ve had no need for policyholder service, so no comments on that. Just accumulating interest for my IRA account. They did mess up when they issued the policy as taxable, but corrected their mistake quickly.

B++ Best rating on the insurance company, Puritan Life.
Last edited by Stinky on Thu Aug 18, 2022 10:07 pm, edited 1 time in total.
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Post by relativeratio »

krafty81 wrote: Thu Aug 18, 2022 4:22 pm Has anyone used Canvas? Avail in my state and paying 4.6% for five years.
There is this guy who I think might be talking to himself about the above mentioned company and his experience.

viewtopic.php?t=384149

He sounds like a real "Karen" asking to speak to a manager because he thinks he might be getting incorrect information on opening a MYGA with his Roth funds. I think he might feel he is entitled to good customer service because he wants to invest 300k. Their customer service might be right to not take the time to ensure that they are giving him the right answer when they are being asked to do more than cursory research on the question. It would be a terrible business decision to take all that time and provide some frustrated individual clear and accurate instructions on opening his account. In my opinion, he needs to go some place else. Who knows, if they take the time to get things right with this "Karen" then someone with a millionaire dollars to invest might call next and want the same treatment. Now, we all know, that tying up the phone for this can only be bad business decision.

Another thing, you know that poster has got to be too difficult to deal with as well, when he is obviously posting a MYGA related question outside the MYGA - mega thread. Let him invest in a brokered CD instead.
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Post by krafty81 »

Ratio, you are talking about yourself in that post I guess?
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Post by krafty81 »

Found the below on a wesite discussing annuities in CA.

In California, the Guarantee Association protects 80 percent of the present value of the annuity benefits up to $250,000. Whether you purchased one or multiple annuities from a single insurer, the maximum total amount the Guarantee Association will provide is $250,000.

Does this mean that, if I put 100K into a MYGA and the insurance company declares bankrupcy, I would only get 80K back, assuming the value was at 100K?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by tj »

krafty81 wrote: Sun Aug 21, 2022 1:42 pm Found the below on a wesite discussing annuities in CA.

In California, the Guarantee Association protects 80 percent of the present value of the annuity benefits up to $250,000. Whether you purchased one or multiple annuities from a single insurer, the maximum total amount the Guarantee Association will provide is $250,000.

Does this mean that, if I put 100K into a MYGA and the insurance company declares bankrupcy, I would only get 80K back, assuming the value was at 100K?
It sounds like CA is an undesirable state to purchase these products in.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by BarbK »

krafty81 wrote: Sun Aug 21, 2022 1:42 pm Found the below on a wesite discussing annuities in CA.

In California, the Guarantee Association protects 80 percent of the present value of the annuity benefits up to $250,000. Whether you purchased one or multiple annuities from a single insurer, the maximum total amount the Guarantee Association will provide is $250,000.

Does this mean that, if I put 100K into a MYGA and the insurance company declares bankrupcy, I would only get 80K back, assuming the value was at 100K?
That sounds like it to me. If you go the MGYA route, better stick to the A++ (NYL, MassMutual,etc), or A+ companies. The A++ and A+ companies had better rates in June early July than now.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by GaryA505 »

When a non-qualified MYGA is held to maturity and then cashed out, if the owner is under 59.5 do they pay the IRS 10% early withdrawal penalty on the interest?
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by discman017 »

krafty81 wrote: Sun Aug 21, 2022 1:42 pm Does this mean that, if I put 100K into a MYGA and the insurance company declares bankrupcy, I would only get 80K back, assuming the value was at 100K?
Possibly worse than that. "Present value" would account for the surrender charge, right? So you could lose a 9% surrender charge and then 20%, so you only get back $72,800. Ouch.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

krafty81 wrote: Sun Aug 21, 2022 1:42 pm Found the below on a wesite discussing annuities in CA.

In California, the Guarantee Association protects 80 percent of the present value of the annuity benefits up to $250,000. Whether you purchased one or multiple annuities from a single insurer, the maximum total amount the Guarantee Association will provide is $250,000.

Does this mean that, if I put 100K into a MYGA and the insurance company declares bankrupcy, I would only get 80K back, assuming the value was at 100K?
It’s really unfortunate that California has that 20% haircut. I don’t know why the legislature would have adopted the law that way, given that the guaranty fund gets its funding from assessments of licensed insurance companies, rather than from the state of California. Maybe it’s a backlash after the insolvency of Executive Life, which was a California domiciled company that was one of the largest life insurance insolvencies ever.

This haircut argues in favor of purchasing from relatively highly rated companies. The chances that an A++ or A+ company can’t fully perform on a 5 year MYGA is essentially zero, but the chances of non performance rise as the rating goes down.

As to how the haircut would be applied - let’s say that you had a $100k contract with a 9% surrender charge. The net surrender value would be $91k, and the max coverage under the guaranty fund would be 80% of that, or $72.8k.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

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GaryA505 wrote: Sun Aug 21, 2022 4:52 pm When a non-qualified MYGA is held to maturity and then cashed out, if the owner is under 59.5 do they pay the IRS 10% early withdrawal penalty on the interest?
Yes, if funds are withdrawn under the circumstances described, there would a be 10% penalty on the interest withdrawn.

The penalty can be avoided by doing a 1035 exchange into another annuity, and continuing to keep the funds within an annuity wrapper until after age 59.5.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by HueyLD »

krafty81 wrote: Sun Aug 21, 2022 1:42 pm Found the below on a wesite discussing annuities in CA.

In California, the Guarantee Association protects 80 percent of the present value of the annuity benefits up to $250,000. Whether you purchased one or multiple annuities from a single insurer, the maximum total amount the Guarantee Association will provide is $250,000.

Does this mean that, if I put 100K into a MYGA and the insurance company declares bankrupcy, I would only get 80K back, assuming the value was at 100K?
Yes, see Stinky’s reply above.

In addition to the 20% haircut, CA also applies interest rate adjustment to contracts issued by insolvent insurance companies. This will lower the payout even more if the guaranteed rate of the insolvent company is in excess of what the Cal Life and Health Insurance Guarantee Association considers reasonable.

Therefore, Cal residents probably should stick to highly rated companies.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by relativeratio »

I wonder why State Farm doesn't advertise its MYGA rates.

I had to call an an agent and he wants to call me back with the information. Is it too difficult to just pull up the rates and give them to me? It would save the both of us time.
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Post by Stinky »

relativeratio wrote: Mon Aug 22, 2022 9:48 am I wonder why State Farm doesn't advertise its MYGA rates.

I had to call an an agent and he wants to call me back with the information. Is it too difficult to just pull up the rates and give them to me? It would save the both of us time.
Not all companies that sell MYGAs sell them through firms like Blueprint or Stan. Nor do all companies advertise them.

In particular, I believe that State Farm sells only through its captive agents. And it sounds like the only way to get their rate is to call them.

Companies have wide discretion as to how they choose to market their products. Some distribute broadly; some are more narrow.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by PaulieLilly »

Just wanted to share a LONG Canvas/Puritan partial withdrawal timeline I experienced.
I requested a 10% withdrawal (free partial surrender). This MYGA was funded from my Fidelity IRA so my withdrawal request was to transfer the money back to it. I completed both Fidelity paperwork (required) and Puritan paperwork (don't believe it was necessary). I kept a time log with updates as they happened, here is a summary.

6/22/22: I mailed the withdrawal paperwork to Fidelity.
8/22/22: Fidelity confirmed the deposit in my IRA.

The way I see it, Fidelity and Puritan both share the blame for this lengthy timeline. Fidelity had the wrong address for Puritan "in their system". Rather than Puritan forwarding the paperwork to the correct office they just sent it back to Fidelity with an ambiguous "invalid request" ... this process was subsequently repeated. To Fidelity's credit, they had already assigned a Service Solution Specialist to this case before I started following up in late July (very professional and a good communicator). It ultimately took a 3-way call with me, Fidelity and Puritan to straighten things out. The correct Puritan office officially received the paperwork on 8/2/22. While the overall level of automation within the financial world has been staggering, life insurance companies have sadly been left behind (IMHO).
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

PaulieLilly wrote: Mon Aug 22, 2022 11:37 am While the overall level of automation within the financial world has been staggering, life insurance companies have sadly been left behind (IMHO).
I visited the offices of dozens of life insurance companies during my working career, doing due diligence for my company.

Based on my experience, your observation is ABSOLUTELY correct.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by krafty81 »

Has anyone used Reliance Standard for their MYGA? Paying 4.05% right now, rated A++. Midland National is another one rated A+ paying 4%.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by buddysam1 »

krafty81 wrote: Mon Aug 22, 2022 4:49 pm Has anyone used Reliance Standard for their MYGA? Paying 4.05% right now, rated A++. Midland National is another one rated A+ paying 4%.
I bought a Midland 5yr, 250k+ at 4.3% through Schwab last week. Easy process. Schwab rep took all of my info over the phone and processed the application in about 20 min. The only other thing I had to do was electronic signatures.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by webtrojan »

buddysam1 wrote: Tue Aug 23, 2022 7:30 am
krafty81 wrote: Mon Aug 22, 2022 4:49 pm Has anyone used Reliance Standard for their MYGA? Paying 4.05% right now, rated A++. Midland National is another one rated A+ paying 4%.
I bought a Midland 5yr, 250k+ at 4.3% through Schwab last week. Easy process. Schwab rep took all of my info over the phone and processed the application in about 20 min. The only other thing I had to do was electronic signatures.
As a TD Ameritrade client I can purchase Schwab offerings. Can you see what MYGAs Schwab offer online, or do you have to call them? I guess they don't charge any fees? Just wondering if there is a benefit to buying thru Scwab vs. something like Blueprint.

(On Blueprint, North American (Midland's sister company) 5yr MYGA shows 4.25% (Texas).)
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by krafty81 »

I am a Schwab guy so will check that. Found a 5 year at 4.25% from Americo. Transfer from Roth to Roth seems to be painful. Am I OK distributing 30K out of my Roth (I am 63) into my bank? Then fund the MYGA Roth at Americo with that? If less than 30 days I should be OK right?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Wrench »

webtrojan wrote: Tue Aug 23, 2022 11:37 am
buddysam1 wrote: Tue Aug 23, 2022 7:30 am
krafty81 wrote: Mon Aug 22, 2022 4:49 pm Has anyone used Reliance Standard for their MYGA? Paying 4.05% right now, rated A++. Midland National is another one rated A+ paying 4%.
I bought a Midland 5yr, 250k+ at 4.3% through Schwab last week. Easy process. Schwab rep took all of my info over the phone and processed the application in about 20 min. The only other thing I had to do was electronic signatures.
As a TD Ameritrade client I can purchase Schwab offerings. Can you see what MYGAs Schwab offer online, or do you have to call them? I guess they don't charge any fees? Just wondering if there is a benefit to buying thru Scwab vs. something like Blueprint.

(On Blueprint, North American (Midland's sister company) 5yr MYGA shows 4.25% (Texas).)
Schwab MYGAs: https://www.schwab.com/annuities/fixed-annuities/rates
Most are only available with $100K or more.
Midland National (A+ from AM Best) currently listed at 3.85%, 4.25%, and 4.4% for 3, 5, and 7 years respectively for $100K-$249,999.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by webtrojan »

Wrench wrote: Tue Aug 23, 2022 1:06 pm
webtrojan wrote: Tue Aug 23, 2022 11:37 am
buddysam1 wrote: Tue Aug 23, 2022 7:30 am
krafty81 wrote: Mon Aug 22, 2022 4:49 pm Has anyone used Reliance Standard for their MYGA? Paying 4.05% right now, rated A++. Midland National is another one rated A+ paying 4%.
I bought a Midland 5yr, 250k+ at 4.3% through Schwab last week. Easy process. Schwab rep took all of my info over the phone and processed the application in about 20 min. The only other thing I had to do was electronic signatures.
As a TD Ameritrade client I can purchase Schwab offerings. Can you see what MYGAs Schwab offer online, or do you have to call them? I guess they don't charge any fees? Just wondering if there is a benefit to buying thru Scwab vs. something like Blueprint.

(On Blueprint, North American (Midland's sister company) 5yr MYGA shows 4.25% (Texas).)
Schwab MYGAs: https://www.schwab.com/annuities/fixed-annuities/rates
Most are only available with $100K or more.
Midland National (A+ from AM Best) currently listed at 3.85%, 4.25%, and 4.4% for 3, 5, and 7 years respectively for $100K-$249,999.
Thanks for the link, Wrench.

Midland 5yr 4.3% - I don't put $250K in one individual MYGA to protect from going over the Texas guarantee limit of $250K, so it is 4.25% below 250K.

One good thing about a Brighthouse 5yr 4.3% in comparison is the surrender charges are less (7,7,7,6,5 vs 9,8,7,6,5), and it will automatically renew for one year with no surrender charges (if you do nothing). Also has a free 10% free yearly withdraw vs. interest only. It's A rated vs A+ Midland.

Does anyone know if all these products generally start the surrender charge schedule over again if you renew for the same term, or are they all contractually different?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

webtrojan wrote: Tue Aug 23, 2022 2:04 pm Does anyone know if all these products generally start the surrender charge schedule over again if you renew for the same term, or are they all contractually different?
It’s my impression that if the policyholder re-ups for a new guarantee period, the rate is reset and the surrender charges starts again. And the agent gets a new commission.

Essentially like a new policy being issued.
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Post by HueyLD »

Stinky wrote: Tue Aug 23, 2022 2:14 pm
webtrojan wrote: Tue Aug 23, 2022 2:04 pm Does anyone know if all these products generally start the surrender charge schedule over again if you renew for the same term, or are they all contractually different?
It’s my impression that if the policyholder re-ups for a new guarantee period, the rate is reset and the surrender charges starts again. And the agent gets a new commission.

Essentially like a new policy being issued.
+1. That’s what the contract clearly states.
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Post by webtrojan »

Thanks, Stinky & Huey. Makes sense. Makes the Brighthouse one year extension clause somewhat appealing.

"If you do nothing, any money left in the contract will automatically renew for a one year guarantee period at the then-current renewal interest rate, but you'll have access to it free of charge at any time."
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Wrench »

HueyLD wrote: Tue Aug 23, 2022 2:34 pm
Stinky wrote: Tue Aug 23, 2022 2:14 pm
webtrojan wrote: Tue Aug 23, 2022 2:04 pm Does anyone know if all these products generally start the surrender charge schedule over again if you renew for the same term, or are they all contractually different?
It’s my impression that if the policyholder re-ups for a new guarantee period, the rate is reset and the surrender charges starts again. And the agent gets a new commission.

Essentially like a new policy being issued.
+1. That’s what the contract clearly states.
A couple of things I noted: Midland annuity at Schwab has a guaranteed minimum interest rate (GMIR) for renewal. They don't say what that is on the web site. The other thing that I noted is that you can withdraw up to your RMD on the account value (in an IRA) without penalty even if is over the contractual withdrawal limit. I didn't look, but I suspect you would have to be pretty old for that to matter under current rules, but who knows how they might change in the future.

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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

webtrojan wrote: Tue Aug 23, 2022 4:17 pm Thanks, Stinky & Huey. Makes sense. Makes the Brighthouse one year extension clause somewhat appealing.

"If you do nothing, any money left in the contract will automatically renew for a one year guarantee period at the then-current renewal interest rate, but you'll have access to it free of charge at any time."
Read your contract carefully.

I suspect that the rate for the one year period might be the minimum rate guaranteed under the contract. Likely something like 1%.
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