Purchasing MYGAs (multi year guaranteed annuities) - mega thread

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

Post by Stinky »

goodenyou wrote: Fri Dec 31, 2021 9:33 am
OkanePlease wrote: Fri Dec 31, 2021 9:25 am
Stinky wrote: Fri Dec 31, 2021 6:08 am Additionally, if/when interest rates rise, MYGAs will continue to pay out at full accumulated value without market value adjustment, a result that can be more attractive than bond funds.
Stinky, I've appreciated this thread and your help elsewhere on the forum! But can you kindly explain more about the quoted statement? I'm not sure of the meaning. Thanks!
It means that bond prices fluctuate with interest rates. As interest rates go up, the bond value (NAV for bond funds) go down. This is "market value adjustment". MYGAs are fixed. Just like a CD. Once the interest rate is set at time of purchase of the MYGA (just like a CD), there is a contractual obligation to pay that rate and the full accumulated value at the end of the contract. You do not get this contractual guarantee with bonds.
Yes, that’s well stated. And that’s what I meant.

My view is that interest rates are at a low-ish point right now. I can pick up some yield over a bond fund by investing in a MYGA.

If interest rates remain unchanged during the MYGA term, I’ll “win” by collecting more interest over the MYGA term than I would have gotten in the bond fund.

If interest rates rise during the MYGA term, the interest-collected differential will shrink, but I will be likely to come out ahead at the end of the MYGA term when the MYGA pays out at full accumulated value while the bond fund NAV remains depressed. I see this as a “win-win”.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by goodenyou »

Stinky wrote: Fri Dec 31, 2021 9:47 am
goodenyou wrote: Fri Dec 31, 2021 9:33 am
OkanePlease wrote: Fri Dec 31, 2021 9:25 am
Stinky wrote: Fri Dec 31, 2021 6:08 am Additionally, if/when interest rates rise, MYGAs will continue to pay out at full accumulated value without market value adjustment, a result that can be more attractive than bond funds.
Stinky, I've appreciated this thread and your help elsewhere on the forum! But can you kindly explain more about the quoted statement? I'm not sure of the meaning. Thanks!
It means that bond prices fluctuate with interest rates. As interest rates go up, the bond value (NAV for bond funds) go down. This is "market value adjustment". MYGAs are fixed. Just like a CD. Once the interest rate is set at time of purchase of the MYGA (just like a CD), there is a contractual obligation to pay that rate and the full accumulated value at the end of the contract. You do not get this contractual guarantee with bonds.
Yes, that’s well stated. And that’s what I meant.

My view is that interest rates are at a low-ish point right now. I can pick up some yield over a bond fund by investing in a MYGA.

If interest rates remain unchanged during the MYGA term, I’ll “win” by collecting more interest over the MYGA term than I would have gotten in the bond fund.

If interest rates rise during the MYGA term, the interest-collected differential will shrink, but I will be likely to come out ahead at the end of the MYGA term when the MYGA pays out at full accumulated value while the bond fund NAV remains depressed. I see this as a “win-win”.
Thanks Stinky. Just for the record, because of your great explanation of MYGAs and confidence in them, I purchased one a few moths ago. Hat tip to you. :beer
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by OkanePlease »

goodenyou wrote: Fri Dec 31, 2021 9:33 am
OkanePlease wrote: Fri Dec 31, 2021 9:25 am
Stinky wrote: Fri Dec 31, 2021 6:08 am Additionally, if/when interest rates rise, MYGAs will continue to pay out at full accumulated value without market value adjustment, a result that can be more attractive than bond funds.
Stinky, I've appreciated this thread and your help elsewhere on the forum! But can you kindly explain more about the quoted statement? I'm not sure of the meaning. Thanks!
It means that bond prices fluctuate with interest rates. As interest rates go up, the bond value (NAV for bond funds) go down. This is "market value adjustment". MYGAs are fixed. Just like a CD. Once the interest rate is set at time of purchase of the MYGA (just like a CD), there is a contractual obligation to pay that rate and the full accumulated value at the end of the contract. You do not get this contractual guarantee with bonds.
Ah, I see. Thanks, goodenyou. I see this as both a pro and con. If investing long-term, I believe that rising interest rates on bonds offset decline of the NAV. (Also, can sell a bond fund at a loss to reduce AGI/MAGI, simultaneously buying a comparable bond fund.) While the MYGA has the guarantee, purchasing while interest rates are low means losing out on rising interest rates (if purchasing later).

I write this as someone investing in both bonds and MYGAs!
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by OkanePlease »

OkanePlease wrote: Fri Dec 31, 2021 9:57 am
goodenyou wrote: Fri Dec 31, 2021 9:33 am
OkanePlease wrote: Fri Dec 31, 2021 9:25 am
Stinky wrote: Fri Dec 31, 2021 6:08 am Additionally, if/when interest rates rise, MYGAs will continue to pay out at full accumulated value without market value adjustment, a result that can be more attractive than bond funds.
Stinky, I've appreciated this thread and your help elsewhere on the forum! But can you kindly explain more about the quoted statement? I'm not sure of the meaning. Thanks!
It means that bond prices fluctuate with interest rates. As interest rates go up, the bond value (NAV for bond funds) go down. This is "market value adjustment". MYGAs are fixed. Just like a CD. Once the interest rate is set at time of purchase of the MYGA (just like a CD), there is a contractual obligation to pay that rate and the full accumulated value at the end of the contract. You do not get this contractual guarantee with bonds.
Ah, I see. Thanks, goodenyou. I see this as both a pro and con. If investing long-term, I believe that rising interest rates on bonds offset decline of the NAV. (Also, can sell a bond fund at a loss to reduce AGI/MAGI, simultaneously buying a comparable bond fund.) While the MYGA has the guarantee, purchasing while interest rates are low means losing out on rising interest rates (if purchasing later).

I write this as someone investing in both bonds and MYGAs!

ETA: Stinky, I see that you replied as I was composing my reply to goodenyou. It would be interesting to see, long-term, a comparison of fixed rate MYGA return vs. overall yield of something like VG Total Bond Fund for the same period of time.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by indexfundfan »

Here's a survey of some recent MYGA rates as of 1/3/22. For interest, I have also added the recent Box Spread loan rates -- arbitrage opportunity? :-)

• 3-yr
○ Canvas B++ 2.6%
○ GainBridge A- 2.5%
○ Oceanview A- 2.5%
○ Box spread loan ~1.4%

• 4-yr
○ GainBridge A- 2.75%
○ Oceanview A- 2.75%
○ Box spread loan ~1.65%

• 5-yr
○ Canvas B++ 3.05%
○ GainBridge A- 3%
○ Atlantic Coast / Sentinel B++ 3.15%
○ Box spread loan ~1.75%
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by HueyLD »

Interesting. Both Oceanview and Guggenheim are A- rated and they offer totally competitive rates. :)
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

indexfundfan wrote: Mon Jan 03, 2022 11:13 am Here's a survey of some recent MYGA rates as of 1/3/22. For interest, I have also added the recent Box Spread loan rates -- arbitrage opportunity? :-)

• 3-yr
○ Canvas B++ 2.6%
○ GainBridge A- 2.5%
○ Oceanview A- 2.5%
○ Box spread loan ~1.4%

• 4-yr
○ GainBridge A- 2.75%
○ Oceanview A- 2.75%
○ Box spread loan ~1.65%

• 5-yr
○ Canvas B++ 3.05%
○ GainBridge A- 3%
○ Atlantic Coast / Sentinel B++ 3.15%
○ Box spread loan ~1.75%
I don’t know how a strategy with box spread loans might work.

Can you please educate me? Thanks.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by ivgrivchuck »

indexfundfan wrote: Mon Jan 03, 2022 11:13 am Here's a survey of some recent MYGA rates as of 1/3/22. For interest, I have also added the recent Box Spread loan rates -- arbitrage opportunity? :-)
There is absolutely an arbitrage opportunity. I doubt that it's worth the trouble (and risk) for most people.

If you are really into it:
- Take a $500k box spread loan (1 year and a little over)
- Open 50 trusts
- Buy $10k i-bonds for each trust

I'd guesstimate that you'd make around $500k * (~5% - ~1%) = $20k profit.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by ivgrivchuck »

Stinky wrote: Tue Jan 04, 2022 9:35 pm I don’t know how a strategy with box spread loans might work.

Can you please educate me? Thanks.
It just means taking a margin loan against your stock portfolio and investing the loan amount into a MYGA. When the MYGA matures, pay back the margin loan.

"Box spread" is just a carefully chosen stock option combination which results in one borrowing money from the markets and not from the broker (as is case with the standard margin loan)
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by indexfundfan »

Stinky wrote: Tue Jan 04, 2022 9:35 pm
I don’t know how a strategy with box spread loans might work.

Can you please educate me? Thanks.
Just like ivgrivchuck explained, you take a box spread loan and put the money into MYGAs of the corresponding duration.

E.g. the 5-yr box spread loan rate is about 1.75% and if you put the money into the 3.15% 5-yr MYGA, you profit 1.4% each year, for 5 years. At the end of 5 years, you surrender the MYGA and pay off the loan. Or you can continue and roll into a new term if the rates are still favorable.

Here's the long thread on box spread loans

viewtopic.php?f=10&t=344667
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by tj »

indexfundfan wrote: Tue Jan 04, 2022 10:45 pm
Stinky wrote: Tue Jan 04, 2022 9:35 pm
I don’t know how a strategy with box spread loans might work.

Can you please educate me? Thanks.
Just like ivgrivchuck explained, you take a box spread loan and put the money into MYGAs of the corresponding duration.

E.g. the 5-yr box spread loan rate is about 1.75% and if you put the money into the 3.15% 5-yr MYGA, you profit 1.4% each year, for 5 years. At the end of 5 years, you surrender the MYGA and pay off the loan. Or you can continue and roll into a new term if the rates are still favorable.

Here's the long thread on box spread loans

viewtopic.php?f=10&t=344667
Your box spread loan has a 5 year guaranteed rate duration, or just optimistic?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by indexfundfan »

tj wrote: Wed Jan 05, 2022 7:52 am
indexfundfan wrote: Tue Jan 04, 2022 10:45 pm
Stinky wrote: Tue Jan 04, 2022 9:35 pm
I don’t know how a strategy with box spread loans might work.

Can you please educate me? Thanks.
Just like ivgrivchuck explained, you take a box spread loan and put the money into MYGAs of the corresponding duration.

E.g. the 5-yr box spread loan rate is about 1.75% and if you put the money into the 3.15% 5-yr MYGA, you profit 1.4% each year, for 5 years. At the end of 5 years, you surrender the MYGA and pay off the loan. Or you can continue and roll into a new term if the rates are still favorable.

Here's the long thread on box spread loans

viewtopic.php?f=10&t=344667
Your box spread loan has a 5 year guaranteed rate duration, or just optimistic?
The rate is determined and fixed at the point the box spread is sold. E.g. you receive about $920 now for the sale and pay back $1000 five years later (note: it is several days short of 5 years since the options mature on 12/18/2026). It's like you have sold a zero coupon bond.

I would say that I only mentioned this "anomaly" in passing. I am not encouraging people to do it.

I suggest that further discussions of box spreads should be in the box spread thread. Let's not derail this thread.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by tman9999 »

Stinky wrote: Thu Dec 31, 2020 6:46 am Information on Annuity Advantage and Stan the Annuity Man is included in a post near the bottom of the third page of this thread. Immediateannuities.com is discussed near the top of the fourth page.

Over the last few months, I've purchased multi-year guaranteed annuities (MYGAs) from each of Blueprint Income, Gainbridge, and Canvas, as I constructed a "MYGA ladder" (similar to a CD ladder). For the benefit of anyone who is considering purchasing MYGAs. I decided to compare and contrast the products and service on each of these platforms,

(To learn more about MYGAs, search the Forum for "MYGA", as there have been multiple recent threads on this topic. There is also an article in the Wiki. A one sentence summary - a MYGA, also known as a "CD annuity", can offer an attractive interest rate relative to a bank CD, and comes with the caveats of (a) state guaranty fund protection rather than FDIC insurance and (b) punishingly high surrender charges on most products.)

Blueprint Income (www.blueprintincome.com)
I chose to go with Blueprint for the majority of my purchases. Blueprint acts as an agent for over two dozen insurance companies. In my opinion, Blueprint's website is more user-friendly and has much more information than other agents like Stan the Annuity Man and Immediate Annuities, so I used Blueprint exclusively.

Positives -
--- Over two dozen insurers have products available through Blueprint. These companies have AM Best ratings ranging from A++ to B+. In general, lower rated companies pay higher interest rates. This choice of companies allows folks to decide on the combination of interest rate and financial strength rating that best fits their situation.
--- Products are available for every duration from 2 years to 10 years. Note that not all companies sell products at all durations.
--- Blueprint's website is very user friendly and easy to navigate, and contains a deep body of information on every product offered. It's easy to compare and contrast products on the website. In my view, this is a major advantage over the other annuity agents mentioned above.
--- The application for either a "taxable" or "IRA" annuity can be completed fully online. The Blueprint team then follows up with an email to confirm the choices indicated in the online application.
--- Blueprint's customer service is excellent. I chose to communicate exclusively through email, and always found the Blueprint team to be very responsive to my questions and comments. The Blueprint team is very knowledgeable about what they are selling. The reviews submitted by buyers are extremely positive, and those who chose to call the Blueprint team seemed to be very happy with the phone service.

Negatives -
--- The timeline for purchasing annuities through an independent agency like Blueprint is longer than for purchasing through a "controlled" agent like Canvas and Gainbridge. All of my purchases through Blueprint were IRA annuities, so they each involved the additional time-consuming step of the insurance company reaching out to Vanguard to "pull" money from my IRA. The shortest time between application date and policy effective date was two weeks. The longest time between application and policy effective was six weeks, because the insurance company lost the fax (I didn't know that anybody still used fax machines). I'm certain that taxable annuities, which are funded through a check or ACH transfer, would move faster, but probably not as fast as with Canvas and Gainbridge.



Canvas (www.canvasannuity.com) and Gainbridge (www.gainbridge.life)
Both of these agencies are closely associated with a single insurance company, and sell only the products of that insurance company. Canvas works with Puritan Life, and Gainbridge works with Guggenheim Life. Both of these companies are rated B++ by AM Best.

Positives -
--- Both companies currently offer interest rates than are generally higher than the vast majority of rates offered by companies on Blueprint.
--- Both have very fast processing for taxable MYGAs. Presuming that the funds are in your checking account, Canvas can deliver a fully issued and in force policy within 10 minutes of starting the application. Gainbridge goes through a little slower process of verifying bank accounts, but can issue a policy within 2-3 days.

Negatives -
--- Both agencies are offering products issued by only one company.
--- Gainbridge does not currently offer IRA annuities, but says that they plan to within the next year or so.
--- Canvas doesn't indicate on their website that IRA annuities are available. However, they told me in an email that they do offer them. I am in the middle of purchasing an IRA annuity through them, and find that their current process is very manual. After an initial phone interview to determine "suitability", they emailed me an entirely manual application that needed to be printed out, completed, and scanned back to them. They also requested a notarized form to verify my identity, which was not requested by any of the companies represented by Blueprint Income. I expect that Canvas will be improving their process for IRA annuities in the future.
Great information, all. Thanks for this thread. Just starting to explore getting MYGA ladders set up in both my and wife's IRAs to replace up to half of our bond position in those accounts.

Does anyone know if Gainbridge now supports MYGAs in IRAs? Asking based on @stinky's original post. When I went to their site they made references to 'must be at least 59 1/2...', but nowhere could I find specific references to IRAs.

Their rates look very competitive, their UI looks excellent, and the reviews from people here who have used them all sound good to me.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

tman9999 wrote: Sat Jan 08, 2022 11:44 am
Great information, all. Thanks for this thread. Just starting to explore getting MYGA ladders set up in both my and wife's IRAs to replace up to half of our bond position in those accounts.

Does anyone know if Gainbridge now supports MYGAs in IRAs? Asking based on @stinky's original post. When I went to their site they made references to 'must be at least 59 1/2...', but nowhere could I find specific references to IRAs.

Their rates look very competitive, their UI looks excellent, and the reviews from people here who have used them all sound good to me.
I believe that Gainbridge/Guggenheim now supports IRAs. And they have recently been upgraded from B++ to A- by AM Best.

That makes Gainbridge a more attractive place to purchase a MYGA than when I started this thread just over a year ago.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by tman9999 »

Stinky wrote: Sat Jan 08, 2022 11:52 am
tman9999 wrote: Sat Jan 08, 2022 11:44 am
Great information, all. Thanks for this thread. Just starting to explore getting MYGA ladders set up in both my and wife's IRAs to replace up to half of our bond position in those accounts.

Does anyone know if Gainbridge now supports MYGAs in IRAs? Asking based on @stinky's original post. When I went to their site they made references to 'must be at least 59 1/2...', but nowhere could I find specific references to IRAs.

Their rates look very competitive, their UI looks excellent, and the reviews from people here who have used them all sound good to me.
I believe that Gainbridge/Guggenheim now supports IRAs. And they have recently been upgraded from B++ to A- by AM Best.

That makes Gainbridge a more attractive place to purchase a MYGA than when I started this thread just over a year ago.
Thank you. I'll confirm with them on Monday and post up if I find out anything different. BTW, do you have a Gainsbridge referral code for me to use if I sign up?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Wrench »

Does anyone know if there is flexibility in the period for MYGAs? For example, if I need the money in Sept 2024 for an expected expense then and want to buy now, can I get a term of 2 years, 8 months rather than 3 years? I know this is possible with deferred income annuities (I have done it) but wondering if it is possible with MYGAs.

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

Post by Stinky »

Wrench wrote: Thu Jan 20, 2022 12:11 pm Does anyone know if there is flexibility in the period for MYGAs? For example, if I need the money in Sept 2024 for an expected expense then and want to buy now, can I get a term of 2 years, 8 months rather than 3 years? I know this is possible with deferred income annuities (I have done it) but wondering if it is possible with MYGAs.

Wrench
I’m unaware of any such product. The agents websites show products quotes only for “whole years”.

You could call an agency like Blueprint Income to see if any of their carriers would issue such a product. I wouldn’t bet on it, but you never know.

Another possibility is to purchase a 3 year product from a company that has low surrender charges. The Gainbridge/Guggenheim 3 year product has a surrender charge of just 1% in the third policy year. In aggregate, you might find that the interest earnings over the MYGA lifetime are attractive, even with paying the 1% surrender charge. And, you could take out your 10% free withdrawal before surrendering to further reduce the basis on which the surrender charge is assessed. There might also be a market value adjustment upon surrender.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Wrench »

Stinky wrote: Thu Jan 20, 2022 12:35 pm
Wrench wrote: Thu Jan 20, 2022 12:11 pm Does anyone know if there is flexibility in the period for MYGAs? For example, if I need the money in Sept 2024 for an expected expense then and want to buy now, can I get a term of 2 years, 8 months rather than 3 years? I know this is possible with deferred income annuities (I have done it) but wondering if it is possible with MYGAs.

Wrench
I’m unaware of any such product. The agents websites show products quotes only for “whole years”.

You could call an agency like Blueprint Income to see if any of their carriers would issue such a product. I wouldn’t bet on it, but you never know.

Another possibility is to purchase a 3 year product from a company that has low surrender charges. The Gainbridge/Guggenheim 3 year product has a surrender charge of just 1% in the third policy year. In aggregate, you might find that the interest earnings over the MYGA lifetime are attractive, even with paying the 1% surrender charge. And, you could take out your 10% free withdrawal before surrendering to further reduce the basis on which the surrender charge is assessed. There might also be a market value adjustment upon surrender.
Thank you Stinky. I chatted with Gainbridge online. As you suspected, they will not adjust the term to different than the years listed. I like your idea of paying the 1% surrender charge in year 3, except there is also a market value adjustment (MVA) if you surrender early. It is "based on the change in interest rates between purchase and the decision to withdraw". So basically unknown. Probably not worth the risk at least to me, as the MVA could easily eat up any advantage of the initial higher rate.

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

Post by Stinky »

Wrench wrote: Thu Jan 20, 2022 2:52 pm
Stinky wrote: Thu Jan 20, 2022 12:35 pm
Wrench wrote: Thu Jan 20, 2022 12:11 pm Does anyone know if there is flexibility in the period for MYGAs? For example, if I need the money in Sept 2024 for an expected expense then and want to buy now, can I get a term of 2 years, 8 months rather than 3 years? I know this is possible with deferred income annuities (I have done it) but wondering if it is possible with MYGAs.

Wrench
I’m unaware of any such product. The agents websites show products quotes only for “whole years”.

You could call an agency like Blueprint Income to see if any of their carriers would issue such a product. I wouldn’t bet on it, but you never know.

Another possibility is to purchase a 3 year product from a company that has low surrender charges. The Gainbridge/Guggenheim 3 year product has a surrender charge of just 1% in the third policy year. In aggregate, you might find that the interest earnings over the MYGA lifetime are attractive, even with paying the 1% surrender charge. And, you could take out your 10% free withdrawal before surrendering to further reduce the basis on which the surrender charge is assessed. There might also be a market value adjustment upon surrender.
Thank you Stinky. I chatted with Gainbridge online. As you suspected, they will not adjust the term to different than the years listed. I like your idea of paying the 1% surrender charge in year 3, except there is also a market value adjustment (MVA) if you surrender early. It is "based on the change in interest rates between purchase and the decision to withdraw". So basically unknown. Probably not worth the risk at least to me, as the MVA could easily eat up any advantage of the initial higher rate.

Wrench
For what it's worth, below is the MVA language from my Guggenheim MYGA. The "MVA Reference Rate" is equal to the Moody's Yield on Baa seasoned corporate bonds (3.29% on the date my contract was issued), and the "Market Value Adjustment Multiplier" in my contract is equal to 100%.

If I surrendered four months early, at a time when the Moody's rate was 4.29% (up 1.00% from the issue date of the contract, the MVA would seem to be (100%) X (4.29% - 3.29%) X (4/12) = 0.333%. So not a huge hit - but something to be considered.

MARKET VALUE ADJUSTMENTS
The Market Value Adjustment is a positive or negative adjustment that We may apply to the Account Value of this contract upon withdrawal, surrender or application of a Settlement Option at any time other than at the end of a Guaranteed Interest Rate Period. It is based upon the change in movement of the MVA Reference Rate during the current Guaranteed Interest Rate Period.

Each Market Value Adjustment will equal the amount being withdrawn, surrendered or applied to a Settlement Option, less any available Free Withdrawal Amount for the current Contract Year, and (if such amount is greater than $0) times the Market Value Adjustment Factor.
The Market Value Adjustment Factor applicable to any Market Value Adjustment is the product of M x (A-B) x (N/12), where:
A = The MVA Reference Rate on the Guaranteed Interest Rate Period Start Date as identified on the Specifications Page;
B = The MVA Reference Rate at the time the Market Value Adjustment would be applied;
M = The Market Value Adjustment Multiplier; and
N = The number of complete months from the date of withdrawal, surrender or application of the Settlement Option to the end of the Market Value Adjustment Period.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Tom_T »

I am 63. I am still working, but I'm not planning to work for more than another year. Given low bond fund yields, I was thinking about devoting some money to MYGAs. If bond yields rise, then I'd still have some skin in that game.

I have around four years' expenses in non-deferred vehicles, and the rest is in TIRA. My plan is to make it through seven years to 70, at which time SS for myself+spouse which will cover all expenses.

I've looked at sites like Blueprint and Gainbridge. Gainbridge has terms from 3-10 years, every year, but some of the differences don't seem worth the extra year (e.g. 5 years @ 3%, 6 years @ 3.1%.)

What are some strategies for constructing a ladder?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by hudson »

Tom_T
Do you know the rules and limitations of your state guarantee association?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

Tom_T wrote: Tue Jan 25, 2022 10:02 am I am 63. I am still working, but I'm not planning to work for more than another year. Given low bond fund yields, I was thinking about devoting some money to MYGAs. If bond yields rise, then I'd still have some skin in that game.

I have around four years' expenses in non-deferred vehicles, and the rest is in TIRA. My plan is to make it through seven years to 70, at which time SS for myself+spouse which will cover all expenses.

I've looked at sites like Blueprint and Gainbridge. Gainbridge has terms from 3-10 years, every year, but some of the differences don't seem worth the extra year (e.g. 5 years @ 3%, 6 years @ 3.1%.)

What are some strategies for constructing a ladder?
I think the first thing to look at is where your funds for living expenses would come from between now and age 70. Which pot of money do you plan to draw from, in which year?

Once you have made that determination, you can decide which, if any, the years you want to fund with a MYGA. You’ve looked at two great sources for MYGA quotes.

Insurers have chosen different strategies with respect to the yield curve. Some, like New York Life, have chosen to pay the same rate for all policies durations 3 to 7. Most others have chosen to pay a higher rate for a longer term. For many companies, the “sweet spot” seems to be at 5 years, with fairly nominal increases in credited rates for durations longer than 5 years.

I don’t think there’s any magic to the laddering process. It really just depends on when in the future you need cash, and which pocket (tax deferred or taxable) the funds are in.

One insurer not currently on Blueprint is Pacific Guardian, A rated by AM best. They’re currently paying 3.00% on a 5 year contract. The Blueprint team has told me they’re currently getting licensed with PG. Right now you can see PG rates on annuityadvantage.com.

Finally, do check out your state life and health guaranty fund limits and provisions. Here’s a link for you.
https://www.nolhga.com/policyholderinfo ... ocation/ga

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

Post by Wrench »

One thing I have not seen mentioned (at least I don't remember it if it was) is what happens when the owner of MYGA dies. Can beneficiaries be named in the contract in case of the death of the owner? If so, does the MYGA stay in force until the end of the term and then funds are distributed? Or, is the MYGA value at the time of the owner's death distributed immediately to the beneficiaries? Seems like this would be important to know for estate planning purposes.

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

Post by Super Hans »

Wrench wrote: Wed Jan 26, 2022 3:38 pm One thing I have not seen mentioned (at least I don't remember it if it was) is what happens when the owner of MYGA dies. Can beneficiaries be named in the contract in case of the death of the owner? If so, does the MYGA stay in force until the end of the term and then funds are distributed? Or, is the MYGA value at the time of the owner's death distributed immediately to the beneficiaries? Seems like this would be important to know for estate planning purposes.

Wrench
These are life insurance contracts, so you definitely specify a beneficiary to receive the proceeds on your death. Contracts vary (perhaps by state) on whether the beneficiary gets a penalty-free immediate payment versus receiving the contract under the original terms.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by HueyLD »

Wrench wrote: Wed Jan 26, 2022 3:38 pm One thing I have not seen mentioned (at least I don't remember it if it was) is what happens when the owner of MYGA dies. Can beneficiaries be named in the contract in case of the death of the owner? If so, does the MYGA stay in force until the end of the term and then funds are distributed? Or, is the MYGA value at the time of the owner's death distributed immediately to the beneficiaries? Seems like this would be important to know for estate planning purposes.
Yes, there is always a designation of beneficiaries. And you can have both primary and secondary (contingent) beneficiaries.

As with any contract, you have to read the specifics in the contract. Generally speaking, a death benefit will be paid out in lump sum unless the beneficiary selects or the deceased owner selected a different option such as an annuity. And the owner’s spouse can take over the contract by becoming the owner if (s)he is the sole primary beneficiary.

Again, the only definitive place for such rules is in the contract.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

HueyLD wrote: Wed Jan 26, 2022 4:30 pm
Wrench wrote: Wed Jan 26, 2022 3:38 pm One thing I have not seen mentioned (at least I don't remember it if it was) is what happens when the owner of MYGA dies. Can beneficiaries be named in the contract in case of the death of the owner? If so, does the MYGA stay in force until the end of the term and then funds are distributed? Or, is the MYGA value at the time of the owner's death distributed immediately to the beneficiaries? Seems like this would be important to know for estate planning purposes.
Yes, there is always a designation of beneficiaries. And you can have both primary and secondary (contingent) beneficiaries.

As with any contract, you have to read the specifics in the contract. Generally speaking, a death benefit will be paid out in lump sum unless the beneficiary selects or the deceased owner selected a different option such as an annuity. And the owner’s spouse can take over the contract by becoming the owner if (s)he is the sole primary beneficiary.

Again, the only definitive place for such rules is in the contract.
I agree with what HueyLD said.

The Blueprint Income website has a section about death benefits for each annuity available for sale. While most annuities pay out full accumulated value at death, some pay only surrender value (unless an additional cost rider is added).

Every MYGA is different. You should do your due diligence before you purchase one.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by SlowMovingInvestor »

I was reading Stan the Annuity Man's site, and he had some comments about Fixed Index Annuities

https://www.stantheannuityman.com/fixed-index-annuity

FIAs also work well in conjunction with MYGAs (Multi-Year Guarantee Annuities) to create a fixed annuity strategy ladder. MYGAs are the annuity industry’s version of a CD, and FIAs are CD type products as well. Both FIAs and MYGAs provide full principal protection, and FIAs without attached riders have no annual fees.


I know that bogleheads are generally negative on FIAs and Stan isn't very positive on them either. But does anyone know what he means here? Is he just saying that one could use FIAs as a replacement for a MYGA/CD? Presumably FIAs only guarantee principal, not the principal + interest that MYGAs return.

Sorry if this is off topic -- I'll move it to its own thread if so.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

SlowMovingInvestor wrote: Fri Jan 28, 2022 1:56 pm I was reading Stan the Annuity Man's site, and he had some comments about Fixed Index Annuities

https://www.stantheannuityman.com/fixed-index-annuity

FIAs also work well in conjunction with MYGAs (Multi-Year Guarantee Annuities) to create a fixed annuity strategy ladder. MYGAs are the annuity industry’s version of a CD, and FIAs are CD type products as well. Both FIAs and MYGAs provide full principal protection, and FIAs without attached riders have no annual fees.


I know that bogleheads are generally negative on FIAs and Stan isn't very positive on them either. But does anyone know what he means here? Is he just saying that one could use FIAs as a replacement for a MYGA/CD? Presumably FIAs only guarantee principal, not the principal + interest that MYGAs return.

Sorry if this is off topic -- I'll move it to its own thread if so.
That’s an interesting reference - thanks for sharing.

I note the following from Stan’s website:
Fixed Index Annuities (FIAs) are currently one of the most popular financial products and pushed by most financial professionals for their built-in high commissions


The “built in high commission” comments is telling to me, and is one of the reasons that I wouldn’t regard indexed annuities as replacement for MYGAs. I think that an average commission on an FIA is about 7%, and I know that the Blueprint website says the commissions on MYGAs are roughly 1-3% (depending on product and company). So if the excess commission on an indexed annuity is 5%, and that’s amortized over a 7 year period (average surrender charge period for FIA), that’s about 0.7% per year of excess commissions. The consumer is paying that excess commission, so I’d expect the earnings on an FIA to average 0.7% less than those on a MYGA.

Another reason that FIAs aren’t a replacement for MYGAs is that FIA’s 7 year surrender charge period is longer than those of many MYGAs, which have guarantee (and surrender charge) periods of 2-6 years.

Finally, as you note, MYGAs have a fixed interest rate. FIAs have a credited rate floored at zero, and probably averaging 0.7% less than MYGSs (see above).
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Tom_T »

Stinky wrote: Tue Jan 25, 2022 10:29 am Post back with questions.
Working through this some more. Comments are welcome!

I want to bridge six years until SS, starting in 2023 and ending at the end of 2028. I turn 70 in December 2028, so that is nice and tidy for planning purposes. Annual expenses are 60K. Spouse is working, that covers 20K, so I need 40K a year. I have 40K in i Bonds, with another 20K next year.

So, if I assume that I can take an additional 20K a year from either i Bonds or from my taxable/TIRA, that leaves me with a 20K/year gap for six years. I don't want to spend down the entire taxable account, but I'm also nervous about withdrawing from IRA stock/bond funds, given that stocks fluctuate and bond funds yields are so low. I want this bridge to be safe.

I could build a ladder with 3-4-5-6 year rungs, 30K each rung - and by putting extra into each rung, I give myself a little cushion. This would likely come from an IRA transfer, so then cashing in each rung becomes a taxable event. The "extra" covers the tax. 120K total MYGA is only 15% of current portfolio value.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

Tom_T wrote: Sat Jan 29, 2022 10:49 am
Stinky wrote: Tue Jan 25, 2022 10:29 am Post back with questions.
Working through this some more. Comments are welcome!

I want to bridge six years until SS, starting in 2023 and ending at the end of 2028. I turn 70 in December 2028, so that is nice and tidy for planning purposes. Annual expenses are 60K. Spouse is working, that covers 20K, so I need 40K a year. I have 40K in i Bonds, with another 20K next year.

So, if I assume that I can take an additional 20K a year from either i Bonds or from my taxable/TIRA, that leaves me with a 20K/year gap for six years. I don't want to spend down the entire taxable account, but I'm also nervous about withdrawing from IRA stock/bond funds, given that stocks fluctuate and bond funds yields are so low. I want this bridge to be safe.

I could build a ladder with 3-4-5-6 year rungs, 30K each rung - and by putting extra into each rung, I give myself a little cushion. This would likely come from an IRA transfer, so then cashing in each rung becomes a taxable event. The "extra" covers the tax. 120K total MYGA is only 15% of current portfolio value.
Sounds like a good plan to me.

Check out your state guaranty fund rules. If your state has a $250k limit (as many do), you could choose to buy from one company, or spread it around.

You’ll find attractive rates for all these durations from Gainbridge.life (A- rated) and Pacific Guardian (A rated). There are many other companies with good rates.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Tom_T »

I'm in New Jersey. They cover 500K of the present value of annuity benefits.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

Tom_T wrote: Sat Jan 29, 2022 11:09 am I'm in New Jersey. They cover 500K of the present value of annuity benefits.
I just checked the NJ website.

The $500k you refer to refers to future payments from a SPIA or similar payout annuity.

The limit for the cash surrender value of an annuity is $100k. That’s the number you should be looking at.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Tom_T »

If I invest more than 100K, then I would need two companies to be completely safe?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

Tom_T wrote: Sat Jan 29, 2022 11:27 am If I invest more than 100K, then I would need two companies to be completely safe?
Yes, that is correct.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

Tom_T wrote: Sat Jan 29, 2022 11:27 am If I invest more than 100K, then I would need two companies to be completely safe?
Unfortunately, it looks like Pacific Guardian is not licensed in NJ.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Tom_T »

Stinky wrote: Sat Jan 29, 2022 11:32 am
Tom_T wrote: Sat Jan 29, 2022 11:27 am If I invest more than 100K, then I would need two companies to be completely safe?
Unfortunately, it looks like Pacific Guardian is not licensed in NJ.
I could get around this by sticking to 25K for four years. Covering taxes on a withdrawal won't be an issue.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by goodenyou »

Stinky wrote: Sat Jan 29, 2022 11:29 am
Tom_T wrote: Sat Jan 29, 2022 11:27 am If I invest more than 100K, then I would need two companies to be completely safe?
Yes, that is correct.
I thought the State guarantee amount was per person and not per account. That is, the limit is across all accounts. I may not be understanding this correctly, but that was my interpretation when I purchased a MYGA (Texas).
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

goodenyou wrote: Sat Jan 29, 2022 12:09 pm
Stinky wrote: Sat Jan 29, 2022 11:29 am
Tom_T wrote: Sat Jan 29, 2022 11:27 am If I invest more than 100K, then I would need two companies to be completely safe?
Yes, that is correct.
I thought the State guarantee amount was per person and not per account. That is, the limit is across all accounts. I may not be understanding this correctly, but that was my interpretation when I purchased a MYGA (Texas).
Yes, it is a limit per person and per company.

Tom T was thinking about investing $120k in one company, in a state where the coverage limit is $100k. If he were to do that, he would have $20k uncovered, whether he bought one MYGA or four.

He could spread that amount across two companies and be fully covered.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by tj »

Stinky wrote: Sat Jan 29, 2022 12:13 pm
goodenyou wrote: Sat Jan 29, 2022 12:09 pm
Stinky wrote: Sat Jan 29, 2022 11:29 am
Tom_T wrote: Sat Jan 29, 2022 11:27 am If I invest more than 100K, then I would need two companies to be completely safe?
Yes, that is correct.
I thought the State guarantee amount was per person and not per account. That is, the limit is across all accounts. I may not be understanding this correctly, but that was my interpretation when I purchased a MYGA (Texas).
Yes, it is a limit per person and per company.

Tom T was thinking about investing $120k in one company, in a state where the coverage limit is $100k. If he were to do that, he would have $20k uncovered, whether he bought one MYGA or four.

He could spread that amount across two companies and be fully covered.
Since he has a spouse, wouldn't he have up to another 100k covered by purchasing a policy in her name?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

tj wrote: Sat Jan 29, 2022 2:35 pm
Stinky wrote: Sat Jan 29, 2022 12:13 pm
goodenyou wrote: Sat Jan 29, 2022 12:09 pm
Stinky wrote: Sat Jan 29, 2022 11:29 am
Tom_T wrote: Sat Jan 29, 2022 11:27 am If I invest more than 100K, then I would need two companies to be completely safe?
Yes, that is correct.
I thought the State guarantee amount was per person and not per account. That is, the limit is across all accounts. I may not be understanding this correctly, but that was my interpretation when I purchased a MYGA (Texas).
Yes, it is a limit per person and per company.

Tom T was thinking about investing $120k in one company, in a state where the coverage limit is $100k. If he were to do that, he would have $20k uncovered, whether he bought one MYGA or four.

He could spread that amount across two companies and be fully covered.
Since he has a spouse, wouldn't he have up to another 100k covered by purchasing a policy in her name?
Yes, that is true.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by goodenyou »

Stinky wrote: Sat Jan 29, 2022 12:13 pm
goodenyou wrote: Sat Jan 29, 2022 12:09 pm
Stinky wrote: Sat Jan 29, 2022 11:29 am
Tom_T wrote: Sat Jan 29, 2022 11:27 am If I invest more than 100K, then I would need two companies to be completely safe?
Yes, that is correct.
I thought the State guarantee amount was per person and not per account. That is, the limit is across all accounts. I may not be understanding this correctly, but that was my interpretation when I purchased a MYGA (Texas).
Yes, it is a limit per person and per company.

Tom T was thinking about investing $120k in one company, in a state where the coverage limit is $100k. If he were to do that, he would have $20k uncovered, whether he bought one MYGA or four.

He could spread that amount across two companies and be fully covered.
Notwithstanding a potential spousal account, how would he be “fully covered”? If he had $100k at company 1 and $20k at company 2, and both companies went insolvent, wouldn’t the State guarantee only cover up to $100k? Therefore, he is not “fully covered” and be out $20k.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Tom_T »

I hadn't even considered using a second account for my wife. That would solve the problem if I go with 120K. 100K might also work and be simpler. We already have a few IRAs (regular, inherited, Roth), plus his-and-her Treasury Direct accounts, and I'm a little wary of adding two more to the mix.

But, thanks for the info! I can move ahead with my plan one way or another.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

goodenyou wrote: Sat Jan 29, 2022 3:31 pm
Stinky wrote: Sat Jan 29, 2022 12:13 pm
goodenyou wrote: Sat Jan 29, 2022 12:09 pm
Stinky wrote: Sat Jan 29, 2022 11:29 am
Tom_T wrote: Sat Jan 29, 2022 11:27 am If I invest more than 100K, then I would need two companies to be completely safe?
Yes, that is correct.
I thought the State guarantee amount was per person and not per account. That is, the limit is across all accounts. I may not be understanding this correctly, but that was my interpretation when I purchased a MYGA (Texas).
Yes, it is a limit per person and per company.

Tom T was thinking about investing $120k in one company, in a state where the coverage limit is $100k. If he were to do that, he would have $20k uncovered, whether he bought one MYGA or four.

He could spread that amount across two companies and be fully covered.
Notwithstanding a potential spousal account, how would he be “fully covered”? If he had $100k at company 1 and $20k at company 2, and both companies went insolvent, wouldn’t the State guarantee only cover up to $100k? Therefore, he is not “fully covered” and be out $20k.
That’s a question I asked of my state guaranty fund. They confirmed that the limit applies separately to each insolvent company.

That is, if I was unfortunate enough to have purchased MYGAs from two companies that went insolvent, I would have coverage up to my state limit for each MYGA.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by goodenyou »

Stinky wrote: Sat Jan 29, 2022 4:12 pm
goodenyou wrote: Sat Jan 29, 2022 3:31 pm
Stinky wrote: Sat Jan 29, 2022 12:13 pm
goodenyou wrote: Sat Jan 29, 2022 12:09 pm
Stinky wrote: Sat Jan 29, 2022 11:29 am

Yes, that is correct.
I thought the State guarantee amount was per person and not per account. That is, the limit is across all accounts. I may not be understanding this correctly, but that was my interpretation when I purchased a MYGA (Texas).
Yes, it is a limit per person and per company.

Tom T was thinking about investing $120k in one company, in a state where the coverage limit is $100k. If he were to do that, he would have $20k uncovered, whether he bought one MYGA or four.

He could spread that amount across two companies and be fully covered.
Notwithstanding a potential spousal account, how would he be “fully covered”? If he had $100k at company 1 and $20k at company 2, and both companies went insolvent, wouldn’t the State guarantee only cover up to $100k? Therefore, he is not “fully covered” and be out $20k.
That’s a question I asked of my state guaranty fund. They confirmed that the limit applies separately to each insolvent company.

That is, if I was unfortunate enough to have purchased MYGAs from two companies that went insolvent, I would have coverage up to my state limit for each MYGA.
This is from the Texas State Guaranty website:

“Individual aggregate limit: Up to $300,000 per person, regardless of the number of policies or contracts. A limit of $500,000 may apply for people with health benefit plans.”

Different states may have different policies, but I read this as $300,000 limit per person no matter how many MYGAs.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

goodenyou wrote: Sat Jan 29, 2022 6:15 pm This is from the Texas State Guaranty website:

“Individual aggregate limit: Up to $300,000 per person, regardless of the number of policies or contracts. A limit of $500,000 may apply for people with health benefit plans.”

Different states may have different policies, but I read this as $300,000 limit per person no matter how many policies.
Following is the language from the Texas website just immediately precedes the language you quoted:

Overall Benefit Limit (usually applicable when a policyholder has policies of different types with the same insolvent insurance company)

I interpret this to mean that you have an overall limit of $300k per company. You might hit this if, for example, you had a $250 MYGA and a $100k universal life policy cash value with insolvent Company ABC. Both policies separately are within guaranty fund limits, but you would be limited to $300k in the aggregate from Company ABC.

If this benefit limit is relevant to your situation, I suggest that you call the Texas Guaranty Fund and ask them directly. That’s what I did in my state.

(FWIW - I was distantly involved with guaranty fund matters in my prior job. I know that each insolvency is handled as a distinct and discrete project, and assessments to cover any shortfall are based on the particulars of the insolvent company. I didn’t see the regulators handling the insolvency of Company ABC trying to tie in anything from the previously insolvent Company DEF).
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by goodenyou »

Stinky wrote: Sat Jan 29, 2022 8:02 pm
goodenyou wrote: Sat Jan 29, 2022 6:15 pm This is from the Texas State Guaranty website:

“Individual aggregate limit: Up to $300,000 per person, regardless of the number of policies or contracts. A limit of $500,000 may apply for people with health benefit plans.”

Different states may have different policies, but I read this as $300,000 limit per person no matter how many policies.
Following is the language from the Texas website just immediately precedes the language you quoted:

Overall Benefit Limit (usually applicable when a policyholder has policies of different types with the same insolvent insurance company)

I interpret this to mean that you have an overall limit of $300k per company. You might hit this if, for example, you had a $250 MYGA and a $100k universal life policy cash value with insolvent Company ABC. Both policies separately are within guaranty fund limits, but you would be limited to $300k in the aggregate from Company ABC.

If this benefit limit is relevant to your situation, I suggest that you call the Texas Guaranty Fund and ask them directly. That’s what I did in my state.

(FWIW - I was distantly involved with guaranty fund matters in my prior job. I know that each insolvency is handled as a distinct and discrete project, and assessments to cover any shortfall are based on the particulars of the insolvent company. I didn’t see the regulators handling the insolvency of Company ABC trying to tie in anything from the previously insolvent Company DEF).
Thank you for your input. You have been an invaluable leader in this discussion and we all have you to thank. I will reach out to the Texas Guaranty Fund and update with any relevant information.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by SlowMovingInvestor »

I see a number of MYGAs mention 'Guaranteed Lifetime Income Options'.

Does this mean that they provide a way to annuitize the MYGA at 'maturity' at an interest rate that they specify now (possibly the same interest rate during the original term)? [ The interest rate on the income option may not be explicitly mentioned, but I presume it's implicit in the terms]

Now, one can always rollover the annuity at maturity into an income annuity, but the income stream at that time will depend on market interest rates at that time. So is the advantage of the lifetime income option that you can use it if interest rates fall, but won't use it if interest rates rise (in which case you could just rollover to a better yielding income annuity at that time)?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

SlowMovingInvestor wrote: Mon Jan 31, 2022 8:29 pm I see a number of MYGAs mention 'Guaranteed Lifetime Income Options'.

Does this mean that they provide a way to annuitize the MYGA at 'maturity' at an interest rate that they specify now (possibly the same interest rate during the original term)? [ The interest rate on the income option may not be explicitly mentioned, but I presume it's implicit in the terms]

Now, one can always rollover the annuity at maturity into an income annuity, but the income stream at that time will depend on market interest rates at that time. So is the advantage of the lifetime income option that you can use it if interest rates fall, but won't use it if interest rates rise (in which case you could just rollover to a better yielding income annuity at that time)?
Can you point us to any particular products/companies that have such an option?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by SlowMovingInvestor »

Stinky wrote: Mon Jan 31, 2022 8:41 pm
SlowMovingInvestor wrote: Mon Jan 31, 2022 8:29 pm I see a number of MYGAs mention 'Guaranteed Lifetime Income Options'.

Does this mean that they provide a way to annuitize the MYGA at 'maturity' at an interest rate that they specify now (possibly the same interest rate during the original term)? [ The interest rate on the income option may not be explicitly mentioned, but I presume it's implicit in the terms]

Now, one can always rollover the annuity at maturity into an income annuity, but the income stream at that time will depend on market interest rates at that time. So is the advantage of the lifetime income option that you can use it if interest rates fall, but won't use it if interest rates rise (in which case you could just rollover to a better yielding income annuity at that time)?
Can you point us to any particular products/companies that have such an option?
If you look at this page which shows Fido's MyGAs

https://www.fidelity.com/annuities/defe ... es/compare

and scroll to the bottom section marked 'Other', all mention 'guaranteed lifetime income options'. I don't have detailed documents on the annuities, so I can't tell exactly what that refers to.

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

Post by Stinky »

SlowMovingInvestor wrote: Mon Jan 31, 2022 8:49 pm
Stinky wrote: Mon Jan 31, 2022 8:41 pm
SlowMovingInvestor wrote: Mon Jan 31, 2022 8:29 pm I see a number of MYGAs mention 'Guaranteed Lifetime Income Options'.

Does this mean that they provide a way to annuitize the MYGA at 'maturity' at an interest rate that they specify now (possibly the same interest rate during the original term)? [ The interest rate on the income option may not be explicitly mentioned, but I presume it's implicit in the terms]

Now, one can always rollover the annuity at maturity into an income annuity, but the income stream at that time will depend on market interest rates at that time. So is the advantage of the lifetime income option that you can use it if interest rates fall, but won't use it if interest rates rise (in which case you could just rollover to a better yielding income annuity at that time)?
Can you point us to any particular products/companies that have such an option?
If you look at this page which shows Fido's MyGAs

https://www.fidelity.com/annuities/defe ... es/compare

and scroll to the bottom section marked 'Other', all mention 'guaranteed lifetime income options'. I don't have detailed documents on the annuities, so I can't tell exactly what that refers to.

Thanks!
Thanks for the link to the Fidelity page.

I think that the “guaranteed lifetime income options” refer to the guaranteed purchase rates that are contained in all annuities of every type, no matter where they are purchased.

I wouldn’t expect that the “lifetime income” rates guaranteed in a contract issued now would be very attractive. In particular, the guaranteed purchase rates would not reflect a continuation of the accumulation rate of the MYGA; rather, it would be a more conservative (that is, lower) interest rate.

FYI - relatively few folks who buy an “accumulation” annuity like a MYGA or a VA actually annuitize the annuity. The vast majority simply use the annuity for accumulation, and withdraw the funds outside of an annuitization option at some point.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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