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Old 10-20-2021, 08:13 AM   #61
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Agree, most are terrible. But to say all are "bad" isn't the case.
Timing is also key. Now, it not a good time at all.
Am not aware of any off the shelf annuities now that are even worth looking at.
Agree other than perhaps MYGAs as a CD substitute.
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Old 10-20-2021, 08:31 AM   #62
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Am just learning about "MYGA's"... 100% new to me...
Am ignorant over here, as the money compounds.
Is not distributed monthly or annually. Huge penalty for withdrawals.
How is this considered an annuity? If you are not getting any of the $$$ for 5-7-10 years? Am sure I am missing something with these. Fixed rate, but % returns offered are based on the stock market?
A little help please. LOL LOL
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Old 10-20-2021, 09:07 AM   #63
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Agree, most are terrible. But to say all are "bad" isn't the case.
Timing is also key. Now, it not a good time at all.
Am not aware of any off the shelf annuities now that are even worth looking at.
See my earlier posts. I would buy twice as much if given the opportunity again. These were off-the-shelf products but LF does not pay as well on the same policies anymore.
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Old 10-20-2021, 09:37 AM   #64
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I look at those (MYGA) as more of an uninsured CD type of investment. Rather than an actual annuity.
As the $$$ can't be touched without a huge penalty. For the full term. 3-5-7-10 years.
How is this lumped into the annuity category? Just curious...

The annuity I took at 55, 5yrs ago is insured. $280k pays $1520 a month for life / 1/2 that for the wife if I kick 1st.
Works out to what? 5%? Would also double up given the chance today. But nothing out there comes close.
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Old 10-20-2021, 10:10 AM   #65
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Key here, is that it was 12 years ago, when interest rates were comparatively speaking to now quite heavenly, so the payout is much better.
You are correct. I was fortunate enough to purchase these annuities during a favorable interest environment. When considering what your payments will be throughout the rest of your life, I would not advise anyone to consider a SPIA at this time.
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Old 10-20-2021, 10:50 AM   #66
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I look at those (MYGA) as more of an uninsured CD type of investment. Rather than an actual annuity.
As the $$$ can't be touched without a huge penalty. For the full term. 3-5-7-10 years.
How is this lumped into the annuity category? Just curious...
MYGA's are essentially CD's issued by an insurance company rather than a bank. Because they are an insurance product, for tax purposes, they are considered annuities. At maturity you have the option to either cash out or annuitize them giving you a monthly payout that you can't outlive. Unlike a CD, all taxes are deferred until you either cash out or annuitize the contract and start taking monthly payments.

10 years ago I purchased a 5 year 3% deferred annuity. When it matured 5 years ago, I was given a third option to keep the contract at the same 3% return with the ability to withdraw anytime without penalty. I continue to hold it to this day as there is no bank the pays 3% in a totally liquid account that I'm aware of. The best high yield money market accounts are around 0.5%.
It has the added benefit that taxes on interest continue to defer until I withdraw.
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Old 10-20-2021, 10:52 AM   #67
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I am trying to decide what to do now that i have lots of growth in the annuity. I already have a significant amount of money in a rollover IRA that iím working to move to Roth each year. Any advice is welcome.
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Old 10-20-2021, 10:54 AM   #68
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Quote:
Originally Posted by almost there View Post
Am just learning about "MYGA's"... 100% new to me...
Am ignorant over here, as the money compounds.
Is not distributed monthly or annually. Huge penalty for withdrawals.
How is this considered an annuity? If you are not getting any of the $$$ for 5-7-10 years? Am sure I am missing something with these. Fixed rate, but % returns offered are based on the stock market?
A little help please. LOL LOL
You're close. Think of it as similar to a bank CD but issued by an insurance company. Fixed term like a CD. Usually a fixed rate of interest like a CD. No FDIC insurance, but state guarantee fund coverage. Negligible credit risk of default vs theoretically risk-free for an FDIC insured CD.

While there are other flavors of annuities that the return is based on the stock market, MYGAs are fixed interest and not based on the stock market.

CD early withdrawal penalties are typically a year or less of interest... so say 2-3% at most these days whereas MYGA surrender penalties are often severe... commonly starting at 10% and grading down over the term of the MYGA. However, most MYGAs allow the holder to withdraw up to 10% penalty free... ususally for a short window of time once a year.

The reason it is an annuity is because the contract contains an annuitization option at the end, but it is usually so unappealing that nobody annuitizes, but because the contract includes that option it is an annuity and therefore qualifies for tax-deferred treatment if it is non-qualified (aka taxable account money).
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Old 10-20-2021, 10:54 AM   #69
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IMHO Interest rates are too low for MYGA investment at the moment. Would be good in a higher rate environment. Same for SPIAs although, I do not know if the initial rate changes on those if the FED rate does.
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Old 10-20-2021, 10:58 AM   #70
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But if interest rates are too low for MYGAs, wouldn't that then in turn apply to bonds and CDs?

I hate to say it and haven't pulled the trigger yet, but from what I've seen for 1-7 year money MYGAs currently are the one of the best horses at the glue factory.
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Old 10-20-2021, 12:52 PM   #71
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What companies issued these annuities?
aren't those just certain annuities - no mortality risk?
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Old 10-20-2021, 12:53 PM   #72
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You are our actuary here on the forum and I am looking forward to your analysis.
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Old 10-20-2021, 12:56 PM   #73
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Does anyone have a list of D2C (Direct To Consumer) Annuity Insurance Companies?

Most annuity advertisers on the web are Agents. This indicates that they must get quite a kickback from the Insurance companies, that inevitably the consumer pays for. It may be beneficial to deal directly with the Insurance companies. If I were looking for an Annuity, (I am not ..... yet), and If you are like me and only want to deal with A+ or Better companies, I would prefer to see a list of companies, do some due diligence, then contact them directly for quotes.
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Old 10-20-2021, 12:58 PM   #74
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- $218K lump sum payment to buy 10-year term annuity. $2820 per month, 120 monthly payments to start at age 60. If I die before it starts paying, the premium is returned to beneficiary. If I die after payment starts, the remainder of the monthly payments will be made to beneficiaries to the full term/duration. Total amount of payout at end of 10 years is $338,400.

-
I get something around 3.75% - this annuity pays 120 payments certain and it was deferred 6.5 years - there are no life contingencies involved
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Old 10-20-2021, 01:07 PM   #75
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- 211K lump sum payment to buy 15-year term annuity. $3786 per month, 180 monthly payments to start at age 70. Similarly, if I die before it starts paying, the premium is returned to the beneficiary. If I die after payment starts, the remainder of the monthly payments will be made to beneficiaries to the full term/duration. Total amount of payout at end of 15 years is $681,480.


-
I get 5% for this one
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Old 10-20-2021, 01:11 PM   #76
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I get about 3.91% for the first one. I previously did an IRR calculation and got about 9% but realize now that for the years with no cash flows I had blanks rather than zeros... if I replace with zeros I get 3.95%.

[PV(3.91%/12,120,$2,820,0)]/(1+3.91%)^6.5 = $217,991

3.91% seems very plausible.... 9% didn't. Whew!
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Old 10-20-2021, 01:15 PM   #77
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I get 5% for this one
Yup... 5.06%
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Old 10-20-2021, 03:31 PM   #78
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IMHO Interest rates are too low for MYGA investment at the moment. Would be good in a higher rate environment. Same for SPIAs although, I do not know if the initial rate changes on those if the FED rate does.


Whatís too low? I purchased A rated 5 yr @ 3% a year ago. Same product now is 2.65% but 3% is still available if you accept B+ ( I do ). So glad I did my due diligence and did not swallow the all annuities are bad mantra. These are still good substitutes for CDs. My rate drops to 1% at maturity which is still decent at this point. Another thing I really like is the rate lock provisions. I can apply, lock in my rate and get 30-60 days to fund. If rates go up I can cancel. Works well in a falling rate environment with CDs maturing in the next 60 days. Insurance products are backed by State Guaranty Assoc so check there for coverage limit details for each state.
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Old 10-20-2021, 04:08 PM   #79
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@Big_Hitter, those were about the numbers that I got when I did a trial and error percentage, compounded for each year, on a spreadsheet. Thank you! Given the interest rate environment and high stock market indices - high risk, I feel that they are decent returns which makes up a slice of our retirement income pie.
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Old 10-21-2021, 06:26 AM   #80
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I agree that this might be a bad time to buy MYGAs. I like the ones I bought a few years back. Rates are now low and you get locked in. True, they pay better than equivalent CDs, but it's easier to get out of a CD (just a little interest lost - not a significant penalty.) Also, with inflation now rearing its ugly rear, interest rates will likely rise. I'd wait on MYGAs or try to find something else (I-bonds for "small amounts.") YMMV
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