3 year term Fixed Guaranteed Growth Annuity

[FIREHAPPY]

Given the current low CD rate environment, my financial rep suggested I consider a 3 year term Fixed Guaranteed Growth Annuity with a return as high as 1.7%. The 6 firms recommended have S&P ratings of of AA+, AA- or A+.

Has anyone utilized this type of investment option? It's my understanding the funds are not insured so evaluating the counterparty risk is critical. I generally avoid annuities but this has my interest. What are the pros and cons?

[MRG]

MYGA? or other names. There's been a few threads on these. You know what you think you know, It's about the insurance company's risk of default. I bought one of these last year.

Make sure you understand the withdrawal aspect. You don't want to need early withdrawal outside the yearly window.

[skyking1]

We are likely doing this in August when the current MYGA matures. 3 years will get us to DW's 60th, and it is in her name. Thanks for posting up the rate you were quoted, do you mind sharing the companies?

[MRG]

https://www.early-retirement.org/for...d.php?t=107187

Check this one out.

[pb4uski]

Quote:

Originally Posted by FIREHAPPY Given the current low CD rate environment, my financial rep suggested I consider a 3 year term Fixed Guaranteed Growth Annuity with a return as high as 1.7%. The 6 firms recommended have S&P ratings of of AA+, AA- or A+. Has anyone utilized this type of investment option? It's my understanding the funds are not insured so evaluating the counterparty risk is critical. I generally avoid annuities but this has my interest. What are the pros and cons?

What he is probably steering you to is also know as Multi-Year Guaranteed Annuities or Single Premium Deferred Annuity... the insurer answer to bank CDs.

Rates are better than CDs right now anyway, there is some credit risk but for the highly rated insurers that you are looking at and the short time horizon the credit risk is negligible and they are typically subject to state guaranty funds (similar to FDIC insurance but not as robust).

The real problem with these is that early withdrawal penalties are severe if you need a lot of your money back... much higher than bank CDs... however, most products allow up to 10% withdrawals with no withdrawal fees around each policy anniversary.

So pro is a higher rate than CDs and cons are much higher early withdrawal penalties and negligible credit risk. If you're sure you won't need the money they are not a bad idea.

What are the companies that he recommended?

[FIREHAPPY]

Insurance companies quoted are: USAA; Guardian; MassMutual; New York Life; Principal; Western and Southern

[pb4uski]

All very good companies, especially NYL, Guardian and MassMu.

[MRG]

I used Mass Mutual. Good company. 2.1% last year for a three year contract.

[Jerry1]

About 6 months ago, I got a 7 year MYGA at 3.5%. As pb4uski points out, the early withdrawal penalty is severe so make sure you understand that. With mine, I can withdrawal the earned income annually without penalty. Though, I wouldn't have put the money there if I intended to use it so I'll just let it compound. Basically, it's a replacement for bonds or cash - part of my fixed allocation.

[jazz4cash]

There are 3 websites that have easy quotes for similar products including insurer rating, surrender fees and withdrawal features. I like Blueprint Income the best. The others are immediate annuities.com and StanTheAnnuityMan. Take a look there but the rates you were quoted for ultra highly rated insurers is probably competitive. These are not the annuity products that people say “stay away” from.

[capjak]

I have 3 MYGAs (Deferred Fixed Annuity) purchased in last 6 months from Stan the Annuity Man.

5 year from Mut. of Omaha 2.65%
5 Year from Americo 3.05%
7 Year from Midland Life 3.5%

2 have 10% free withdrawals annually the other is interest only.

I have no intention of withdrawal of any of them.

[Dawg52]

Just bought one yesterday. My 4th one within the last year. I'm keeping them in the 3 year maturity range and all A+ rated. The higher rating hurts the return but I'm fine with that.

[Dtail]

Quote:

Originally Posted by pb4uski All very good companies, especially NYL, Guardian and MassMu.

I have used MassMutual and New York life for my parents.

[teej1985]

Quote:

Originally Posted by FIREHAPPY Insurance companies quoted are: USAA; Guardian; MassMutual; New York Life; Principal; Western and Southern

I wasn't aware that USAA had MYGA's.

Edit: Looks like they have 3 year, 5 year and 10 year policies now. I don't believe they offered these in the past. There are better rates to be had elsewhere.