MYGA Owners: What is the highest allocation you'd have?

[MercyMe]

I recently paid for an hour of chat with a CFP who among other things, suggested that I not allocate more than 10% of my investable assets into MYGA's. I already have two MYGA's (both paying about 3%) and was thinking about adding another one next month from a third insurer if rates stay where they are or go higher.

The next investment amount would be $200k and with this, it would bring me to about 10% of my assets in MYGA's. I wouldn't mind buying a fourth one though since I'm in a high tax bracket and am planning to retire in a year at age 53. The tax deferral is very appealing since I will likely be in a much lower bracket in retirement.

For those here that use MYGA's, at what percent of your assets would you limit this type of money.

[Dtail]

I invest for my parents and their percentage is around 20%. It is diversified in years and issuers. I don't see issues with being over 10%.

[jazz4cash]

Did the CFP say why you should limit MYGA exposure to 10%?
I see no reason to do so but I lump MYGA, CDs, and bonds into a fixed income ladder that is 30% of my portfolio. Bonds and CDs have pulled back a bit and now I think MYGAs will do the same. Blueprint Income just sent me a notice that an A rated provider will be lowering their 5yr from 5.6% on 12/7. That’s a bit better than the bonds and CDs I’m looking at. I’m currently ~6% MYGA.

[MercyMe]

Quote:

Originally Posted by jazz4cash Did the CFP say why you should limit MYGA exposure to 10%? I see no reason to do so but I lump MYGA, CDs, and bonds into a fixed income ladder that is 30% of my portfolio. Bonds and CDs have pulled back a bit and now I think MYGAs will do the same. Blueprint Income just sent me a notice that an A rated provider will be lowering their 5yr from 5.6% on 12/7. That’s a bit better than the bonds and CDs I’m looking at. I’m currently ~6% MYGA.

Honestly, my thinking is that this CFP is just not that familiar with MYGA's.

I got that same message about the 5.6% MYGA dropping soon but I'm not buying until January. I already bought one in January of this year and would like to avoid having two come due in the same year.

[Koolau]

Yeah, I would demand to know WHY 10%. My MYGA allocation happens to be about 10% but it just worked out that way. I had no specific limit in mind but YMMV.

[MercyMe]

Well, he charges by the minute and this was probably the last time I'd use his service so its water under the bridge at this point.

[jazz4cash]

Quote:

Originally Posted by MercyMe Honestly, my thinking is that this CFP is just not that familiar with MYGA's. I got that same message about the 5.6% MYGA dropping soon but I'm not buying until January. I already bought one in January of this year and would like to avoid having two come due in the same year.

One of the great features about MYGAs is that you can apply today to lock in the rate but you may not need to fund the purchase for 30-45 days. Then you have some period of time to cancel (10 -30 days IIRC) if something better comes along. I’m not positive but I assume the maturity date is the date the purchase is funded.

Edit:
Just checked the 5.6% annuity from Guaranty that Blueprint Income is brokering. The rate is lower if you have<100k. The time to fund is 45 days for IRA accounts, 0 days for taxable. Somehow I’m guessing you could negotiate a few days grace period. Also, you could probably just leave the funds in the annuity for an extra month to avoid having to declare too much income in a single year. The MYGAs I own pay 1% apr after maturity.

[pletal]

Quote:

Originally Posted by MercyMe I recently paid for an hour of chat with a CFP who among other things, suggested that I not allocate more than 10% of my investable assets into MYGA's. I already have two MYGA's (both paying about 3%) and was thinking about adding another one next month from a third insurer if rates stay where they are or go higher. The next investment amount would be $200k and with this, it would bring me to about 10% of my assets in MYGA's. I wouldn't mind buying a fourth one though since I'm in a high tax bracket and am planning to retire in a year at age 53. The tax deferral is very appealing since I will likely be in a much lower bracket in retirement. For those here that use MYGA's, at what percent of your assets would you limit this type of money.

I have about 15% in MYGA’s. I see no issue with them and for tax purposes you can pull a percent some years and renew them if you don’t need the cash. Kept us in a lower tax bracket this year…hopefully

[ShokWaveRider]

I think the Key to a MYGA in my case are 2 fold. We only have 6% in MYGAs.

1) Deferred income till withdrawal (or Annuitizing)
2) The Ability to withdraw 10% per year penalty free

Those are the 2 features I look for.

[jazz4cash]

I noticed that MYGA from Guaranty (5 yrs @ 5.6%) only allows 5% withdrawal starting in the 2nd year. My Americo MYGAs allow 10% even in the 1st year. I did choose to take the withdrawal to mitigate risk and take advantage of higher rates even though I am only at 6%. The contract I just purchased in April is eligible for the 10% free withdrawal but it is taking longer than expected to transfer IRA funds.

[Bruno]

MOST FA dont want you to buy MYGA since they dont count as AUM. MYGA dont put any money in their pockets!!

[OldShooter]

Broad brush, MYGAs are essentially corporate bonds. Certainly you'd want to diversify across multiple issuers but after that I don't see that this particular class of asset should have its own limit.

[jazz4cash]

Quote:

Originally Posted by OldShooter Broad brush, MYGAs are essentially corporate bonds. Certainly you'd want to diversify across multiple issuers but after that I don't see that this particular class of asset should have its own limit.

Very broad. MYGAs are regulated insurance products backed by State Guaranty Associations. Diversify according to SGA limits in your state. They can’t be called AFAIK but I must confess I did not read every one of the sixty-some pages for the ones I bought.