Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Seriously Thinking "Fixed" Annuity to Replace Some CDs
Old 05-18-2018, 05:33 AM   #1
Thinks s/he gets paid by the post
 
Join Date: Jun 2003
Location: Historic Florida
Posts: 2,228
Seriously Thinking "Fixed" Annuity to Replace Some CDs

I know "An*#$ties" are bad words in some circles, and many ARE. But I am looking for CD replacements for Non-qualified Moneys in December when my 3% PenFed CDS run out.

Enter the "Fixed" annuity. Currently Returning 3.7% for 5 Years (A+ Rated Co. Including any fees which are low), No penalty 10% Withdrawals per Annum, deferred interest, and the Big one; Guaranteed up to $250k per contract in the state of Florida. An added benefit they are protected from unscrupulous grabbing Lawyers hands (In Florida).

Thoughts. Thinking of putting about $500k in 2 contracts when the time comes.
__________________

__________________
"Arguing with an Engineer is like rolling in the mud with a pig. Just remember that the pig likes it."
ShokWaveRider is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-18-2018, 05:47 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 18,988
You could probably do worse. While I think the credit risk of a A+ rated company is low, particularly after considering guaranty funds, it is a smidgeon higher than FDIC insured CDs. One disadvantage is that unless in a tax-deferred account that the income becomes a slug of taxable income in the year it is withdrawn, but I guess that you could manage that by taking the interest out each year via the 10% free withdrawal provision. Downside is that if you need that money that surrender fees will likely be much higher than CD early withdrawal penalties.

5 year brokered CDs are currently paying ~3.2%. High quality corporate bonds pay the same 3.7% (like BSCN, which has a yield to worst of 3.71%) so I would probably stick with those and accept the smidgen higher credit risk as a tradeoff for better liquidity.
__________________

__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...60/35/5 AA
pb4uski is offline   Reply With Quote
Old 05-18-2018, 05:59 AM   #3
Recycles dryer sheets
 
Join Date: Feb 2015
Posts: 185
I would be careful. This sounds like an indexed annuity with the returns pegged to an index like the S&P 500 for example. Where you can never "lose" money if the market drops, but your upside is capped.

Also, I am sure the "3.7% return" includes an annual return of principal. The fees associated with these insurance products, which is what they are...insurance products...not investments....are well hidden and add up fast.
The up front commissions, surrender charges, etc. make them too expensive and restrictive in my book. Good luck whatever you decide.
MrLoco is offline   Reply With Quote
Old 05-18-2018, 06:15 AM   #4
Recycles dryer sheets
 
Join Date: Dec 2016
Posts: 118
BEFORE you purchase any annuity ask the annuity company what the annual fees are including sub account fees, M&E expenses, any riders. Also ask if there are surrender penalties
FREE866 is offline   Reply With Quote
Old 05-18-2018, 07:07 AM   #5
Thinks s/he gets paid by the post
 
Join Date: Jun 2003
Location: Historic Florida
Posts: 2,228
It is NOT Indexed. Research Fixed Annuities and you will see. Also fees are low for these and are included, returns are actual.

Remember these are NOT your traditional Annuities. These are more commonly sold by Fiduciaries. Never buy from a regular insurance agent. Again, do the research, like anything else.
__________________
"Arguing with an Engineer is like rolling in the mud with a pig. Just remember that the pig likes it."
ShokWaveRider is offline   Reply With Quote
Old 05-18-2018, 07:18 AM   #6
Recycles dryer sheets
 
Join Date: Jan 2008
Location: chicago suburbs
Posts: 377
I am assuming you are referring to Multi Year Guaranteed Annuity MYGA which works the same as a CD. Where you put money in and at the end of the term 3yr/4yr etc... it pays the interest. The difference is that the interest is tax deferred until the MYGA matures.

Most MYGAs allow interest to be distributed of course you will pay tax just like a CD, not all also allow premium to be distributed so would confirm that.

I think MYGAs from an A+ company are a good alternative for fixed income and I have also been investigating them, but I would do a ladder just like a CD (i.e. 3yr/4yr/5yr) incase interest rates increase significantly.
capjak is offline   Reply With Quote
Old 05-18-2018, 07:21 AM   #7
Thinks s/he gets paid by the post
 
Join Date: Jun 2003
Location: Historic Florida
Posts: 2,228
Quote:
Originally Posted by capjak View Post
I am assuming you are referring to Multi Year Guaranteed Annuity MYGA which works the same as a CD. Where you put money in and at the end of the term 3yr/4yr etc... it pays the interest. The difference is that the interest is tax deferred until the MYGA matures.

Most MYGAs allow interest to be distributed of course you will pay tax just like a CD, not all also allow premium to be distributed so would confirm that.

I think MYGAs from an A+ company are a good alternative for fixed income and I have also been investigating them, but I would do a ladder just like a CD (i.e. 3yr/4yr/5yr) incase interest rates increase significantly.
Yes Exactly. More flexible than a CD really because of the 10% Per Year withdrawal clause, and in Florida that $250k insolvency insurance is nice.
__________________
"Arguing with an Engineer is like rolling in the mud with a pig. Just remember that the pig likes it."
ShokWaveRider is offline   Reply With Quote
Old 05-18-2018, 07:23 AM   #8
Recycles dryer sheets
 
Join Date: Jan 2008
Location: chicago suburbs
Posts: 377
Quote:
Enter the "Fixed" annuity. Currently Returning 3.7% for 5 Years (A+ Rated Co.
I would be interested in where you found 3.7% from an A+ rated company as I have not seen one that high for A+ rated.

Fixed Rate Annuities (MYGAs) | Stan The Annuity Manģ
capjak is offline   Reply With Quote
Old 05-18-2018, 07:28 AM   #9
Thinks s/he gets paid by the post
 
Join Date: Jun 2003
Location: Historic Florida
Posts: 2,228
Quote:
Originally Posted by capjak View Post
I would be interested in where you found 3.7% from an A+ rated company as I have not seen one that high for A+ rated.

Fixed Rate Annuities (MYGAs) | Stan The Annuity Manģ
I called an independent Fiduciary I know locally. I do not need them till December so I did not check the company out exactly.
__________________
"Arguing with an Engineer is like rolling in the mud with a pig. Just remember that the pig likes it."
ShokWaveRider is offline   Reply With Quote
Old 05-18-2018, 07:39 AM   #10
Thinks s/he gets paid by the post
Huston55's Avatar
 
Join Date: Jul 2011
Location: The Bay Area
Posts: 2,222
I’d ask yourself why (if?) it’s worth the additional ~0.5% to you to give up the liquidity. Does an extra $2.5k/yr really make that much difference?
__________________
You may be whatever you resolve to be.
Huston55 is offline   Reply With Quote
Old 05-18-2018, 07:41 AM   #11
Recycles dryer sheets
 
Join Date: Jan 2008
Location: chicago suburbs
Posts: 377
Quote:
Originally Posted by ShokWaveRider View Post
I called an independent Fiduciary I know locally. I do not need them till December so I did not check the company out exactly.
Thanks I have seen AM Best rated B++ rated at 3.7 but not A+ is 3.3 per stan the annuity man site (very entertaining videos) and others. Maybe he is quoting another rating system other than AM Best.

Here are the sites I look at:
1. https://www.immediateannuities.com/deferred-annuities/
2. Fixed Rate Annuities (MYGAs) | Stan The Annuity Manģ
3.https://www.annuityadvantage.com/ann...tee-annuities/
capjak is offline   Reply With Quote
Old 05-18-2018, 07:50 AM   #12
Recycles dryer sheets
 
Join Date: Jan 2008
Location: chicago suburbs
Posts: 377
Quote:
Originally Posted by Huston55 View Post
Iíd ask yourself why (if) itís worth the additional ~0.5% to you to give up the liquidity. Does an extra $2.5k/yr really make that much difference?
I would think so, but I am not sure the spread is really that much for what I have been seeing, but if it is than yes that is significant, plus some control of taxes,

at 0.5% and rolled over to a new MYGA after 5 years...

$12,600 compounded 5 years
$25,000 10 years
$38,000 15 years
$52,000 20 years
capjak is offline   Reply With Quote
Old 05-18-2018, 07:52 AM   #13
Thinks s/he gets paid by the post
 
Join Date: Jun 2003
Location: Historic Florida
Posts: 2,228
Plus protection from Litigation in Florida. B++ is OK too.
__________________
"Arguing with an Engineer is like rolling in the mud with a pig. Just remember that the pig likes it."
ShokWaveRider is offline   Reply With Quote
Old 05-18-2018, 07:57 AM   #14
Recycles dryer sheets
 
Join Date: Jan 2008
Location: chicago suburbs
Posts: 377
Quote:
Originally Posted by Huston55 View Post
Iíd ask yourself why (if?) itís worth the additional ~0.5% to you to give up the liquidity.
For Liquidity the $500,000 with several of the companies that supply MYGAs allow 10% a year withdrawal free if >59.5 YO otherwise may have 10% IRS penalty. So after the first year for a 59.5 YO, $50,000 dollars per year.
capjak is offline   Reply With Quote
Old 05-18-2018, 08:27 AM   #15
Thinks s/he gets paid by the post
Huston55's Avatar
 
Join Date: Jul 2011
Location: The Bay Area
Posts: 2,222
I guess Iím still not sold; at least for our situation.

Quote:
Originally Posted by capjak View Post
I would think so, but I am not sure the spread is really that much for what I have been seeing, but if it is than yes that is significant, plus some control of taxes,
If itís a bit more return each year you seek, adjust your AA & retain control over your assets.

Quote:
Originally Posted by ShokWaveRider View Post
Plus protection from Litigation in Florida. B++ is OK too.
OK, I see the value in this. But, are you really worried about litigation? Is that whatís motivating you?

Quote:
Originally Posted by capjak View Post
For Liquidity the $500,000 with several of the companies that supply MYGAs allow 10% a year withdrawal free if >59.5 YO otherwise may have 10% IRS penalty. So after the first year for a 59.5 YO, $50,000 dollars per year.
Yep, access to 10% annually is good but, not as good as access to 100%. You do give up substantial liquidity; no way around that.

I went to the ĎStanTheAnnuityManí link (thanks capjak), and he lists four reasons for buying annuities.

P (Principal Protection): other than litigation protection, I donít see any added PP value over CDs.

I (Income for Life): MYGAs are for a fixed time so, you donít get this.

L (Legacy): Youíre not buying that type of annuity so, no advantage over CDs & not as good as life insurance.

L (Long Term Care): Youíre not buying that type of annuity so, no advantage over CDs; and Stan recommends LTCi if you can qualify.

So, in the end, it seems youíre just chasing a bit of extra return (arenít we all), and considering giving up substantial control (liquidity) to get it. I just canít get there but, thatís just me for our situation.
__________________
You may be whatever you resolve to be.
Huston55 is offline   Reply With Quote
Old 05-18-2018, 08:32 AM   #16
Thinks s/he gets paid by the post
 
Join Date: Jun 2003
Location: Historic Florida
Posts: 2,228
These can be concerted to lifetime income annuities with no loss of principle when you Kark it (Except what you take out over the interest earnt), and Tax Deferral till DW gets on Medicare (to qualify for max ACA subsidy).
__________________
"Arguing with an Engineer is like rolling in the mud with a pig. Just remember that the pig likes it."
ShokWaveRider is offline   Reply With Quote
Old 05-18-2018, 08:37 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 7,573
Quote:
Originally Posted by ShokWaveRider View Post
Plus protection from Litigation in Florida. B++ is OK too.

This seems to be very important to you for whatever reason. And, if you believe there is a good chance that some litigation will be used to take your money from you, well... I can't argue with you. You know your situation far better than any of us do.
__________________
The worst decisions are usually made in times of anger and impatience.
Chuckanut is offline   Reply With Quote
Old 05-18-2018, 08:42 AM   #18
Thinks s/he gets paid by the post
 
Join Date: Jun 2003
Location: Historic Florida
Posts: 2,228
Quote:
Originally Posted by Chuckanut View Post
This seems to be very important to you for whatever reason. And, if you believe there is a good chance that some litigation will be used to take your money from you, well... I can't argue with you. You know your situation far better than any of us do.
Not really, we have an umbrella policy. It is just an added benefit in Florida.

Tax deferral is probably more important right now.
__________________
"Arguing with an Engineer is like rolling in the mud with a pig. Just remember that the pig likes it."
ShokWaveRider is offline   Reply With Quote
Old 05-18-2018, 09:28 AM   #19
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 3,571
I've been watching these also and consider them to be a viable component for fixed allocation. Specifically, the MYGA variety, but also the Secondary Market (fixed) Annuity options look reasonable. I was not brave enough to bring up the subject on this forum because the decent products get lumped in with the predatory stuff.

Now that CD rates are rising, my focus is shifting toward 2-3 year FDIC products.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is online now   Reply With Quote
Old 05-18-2018, 09:57 AM   #20
Recycles dryer sheets
 
Join Date: Jan 2008
Location: chicago suburbs
Posts: 377
Quote:
Originally Posted by jazz4cash View Post
I've been watching these also and consider them to be a viable component for fixed allocation. Specifically, the MYGA variety, but also the Secondary Market (fixed) Annuity options look reasonable. I was not brave enough to bring up the subject on this forum because the decent products get lumped in with the predatory stuff.

Now that CD rates are rising, my focus is shifting toward 2-3 year FDIC products.
As CD rates rise so do MYGAs.

OFF Topic: The secondary market Fixed Annuities provide in some cases higher/attractive returns but I could never go there due to the legal risks see this:
"Secondary Market Annuity" Investors Screwed out of $152,833.37 and Incur Legal Bills to Fight NJ Vendor - Structured Settlements 4Realģ Blog: Structured Settlements | Settlement Planning News and Commentary, Now in 13th Year!
__________________

capjak is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Thinking of Moving Fixed Income AA to CDs. Advice Please Cheesehead FIRE and Money 5 09-21-2015 07:35 AM
UK fixed ISA better than US CDs nun FIRE and Money 0 03-31-2011 10:11 AM
4% Graded Payment in Annuity as Fixed Income Portion Running_Man FIRE and Money 4 09-05-2007 04:09 AM
Fixed Annuity Question OkieTexan FIRE and Money 5 01-15-2007 12:12 PM
Put some spending cash in CDs or in I bonds? Nords FIRE and Money 60 03-15-2005 04:37 AM

» Quick Links

 
All times are GMT -6. The time now is 11:17 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2018, vBulletin Solutions, Inc.