Seriously Thinking "Fixed" Annuity to Replace Some CDs

[pb4uski]

I wasn't aware that they allowed partial withdrawals... would have saved me some bookeeping.

 

[ShokWaveRider]

What other ways are there to defer income to qualify or ACA and be fully insured (In Florida)?

 

[pb4uski]

I didn't realize that income deferral for ACA was part of the decision... that would tilt the playing field to the MYGA.

 

[jazz4cash]

I wasn't aware that they allowed partial withdrawals... would have saved me some bookeeping.

The rules have changed over the years so it's important to read the applicable disclosure. Currently, I understand that IRA CDs permit partial withdrawals but taxable (e.g. Moneymarket) CDs do not. The wording in these disclosures tends to be imprecise.

 

[ShokWaveRider]

Here is some of the Logic for the OP. (I am the OP)

Really would like to take SS at 65 because of poor family longevity. Let us Say $26k a year.

DW needs ACA for 5 years assuming it is still there.

Have non qualified cash that currently generates $40k in interest from CDs (Taxable).

Have Non qualified cash to last at least 5 years in addition to the above.

Want to use cash for 5 years and shelter the rest from being counted as MAGI for 5 years.

A 5 year Fixed Annuity does this and can get 10% PA out if needed. That is $100k on every $1m invested. Again only if really needed as it is a FIFO with respect to interest and it would defeat the object to take the penalty free withdrawals. I do not mind paying taxes later to get good ACA subsidies now for DW. I may not be around to care anyway.

What other choices do I have?

 

[pb4uski]

What about parking what you need for the next 5 years in a low interest bearing account (admittedly inefficient but the subsidies make up for it) and the rest in some low or no dividend equity funds or ETFs or low/no dividend equities like Berkshire?

Then if needed, rebalance through your tax-deferred and tax-free accounts.

 

[ShokWaveRider]

What about parking what you need for the next 5 years in a low interest bearing account (admittedly inefficient but the subsidies make up for it) and the rest in some low or no dividend equity funds or ETFs or low/no dividend equities like Berkshire?

Then if needed, rebalance through your tax-deferred and tax-free accounts.

Unfortunately, I am not interested in ANY stock market risk at all. I think I mentioned that before, maybe.

 

[pb4uski]

How much is the ACA benefit? IOW, is it really worth restructuring your taxable money as you are considering doing for the ACA benefit?

 

[ShokWaveRider]

How much is the ACA benefit? IOW, is it really worth restructuring your taxable money as you are considering doing for the ACA benefit?

For both of us this year was $2200pm. Next year with DW most likely half of that or more with increases.

 

[Huston55]

Have non qualified cash that currently generates $40k in interest from CDs (Taxable).


What other choices do I have?

$40k/yr interest @ 3% is $1.33M, which is a lot of cash.

What about muni-bonds or muni-bond fund? That’s non-taxable income (currently @ ~2.5% return). Keep it for 5 yrs, then adjust if necessary. Plus, you maintain control & liquidity, which most folks value quite a bit.

 

[pb4uski]

Muni bonds don't work... it is one of the add backs for ACA.

http://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf

 

[ShokWaveRider]

What about muni-bonds or muni-bond fund? That’s non-taxable income (currently @ ~2.5% return). Keep it for 5 yrs, then adjust if necessary. Plus, you maintain control & liquidity, which most folks value quite a bit.

"Municipal bonds can be a sweet deal for tax-conscious investors. ... While you aren't taxed on muni bond income, you do need to include it when calculating your modified adjusted gross income, or MAGI, in certain situations."

 

[Huston55]

Muni bonds don't work... it is one of the add backs for ACA.

http://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf

OK. Well forget that idea.