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Old 05-13-2020, 12:28 PM   #61
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My plan is to use the FREE 10% withdrawal each year to pull out the yearly interest to spread it out over the 5 years.
So, I'm trying to understand this.

Are you doing this in order to report annual interest on your taxes - as opposed to reporting all of the interest at the end of the term?
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Old 05-13-2020, 12:41 PM   #62
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So, I set up his and her accounts this morning. Could I also do a joint account?
I'm sure they would happily allow a joint account but strongly doubt they will pass out the bonus for that account. Good job getting the individual accounts first!
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Old 05-13-2020, 03:29 PM   #63
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.... Since it's in my IRA, I don't care about taxes, but if it's not in a retirement account, then you don't pay taxes on the interest until it matures - which can be a way to avoid some tax on interest for a few years....
While this is true, just be aware that when you do withdraw that it is interest first and then principal. So for example, let's say you deposited $100k and 5 years later it has grown to $115k and you take out $25k... you'll have $15k of taxable interest income that year and the remaining $10 of principal isn't taxed.
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Old 05-13-2020, 03:34 PM   #64
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Different question.
I have read the FDIC limit rules, but want to double check here on the forum.

DGF - 144K in GTE IRA CD
DGF/Me - 91k in GTE Taxable joint account

Is my DGF limited to only add 15k more to her GTE IRA account, or can she add on any amount up to 250k to be protected by the FDIC insurance.
Dtail, my recollection is that taxable and tax-deferred accounts are considered separately, so she could add up to $106k to her tIRA and the NCUA (not FDIC) would insure the entire $250k... as well as her half of the $91k in the taxable joint account.

Run your situation through https://www.mycreditunion.gov/insurance-estimator
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Old 05-13-2020, 03:37 PM   #65
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While this is true, just be aware that when you do withdraw that it is interest first and then principal. So for example, let's say you deposited $100k and 5 years later it has grown to $115k and you take out $25k... you'll have $15k of taxable interest income that year and the remaining $10 of principal isn't taxed.
Right.

Doesn't really concern me since it's all in an IRA, but it would make a difference in a taxable account.
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Old 05-13-2020, 03:56 PM   #66
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Dtail, my recollection is that taxable and tax-deferred accounts are considered separately, so she could add up to $106k to her tIRA and the NCUA (not FDIC) would insure the entire $250k... as well as her half of the $91k in the taxable joint account.

Run your situation through https://www.mycreditunion.gov/insurance-estimator
You are correct.
Great site.
Basically, her IRA can be covered to 250k.
Our joint CD can be covered to 500k, irrespective of her IRA balance.

Trying to figure out how much to add to our GTE add on CD's which run at 3.30/3.05% yields and mature in Aug 2024.
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Old 05-13-2020, 04:06 PM   #67
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I'm kicking myself for not starting a taxable CD when I had the opportunity. Wasn't thinking... just did the IRA.
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Old 05-13-2020, 10:32 PM   #68
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That is probably a MVA annuity (market value adjustment). It looks at changes in interest rates and does some kind of adjustment when withdrawals occur.
NO to be honest it might not be a MYGA its a fixed rate annuity like a CD. Its a Sentinel’s Personal Choice Annuity now paying 3.10% but you have to leave it in for 5 years

https://sslco.com/content/personal-choice
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Old 05-13-2020, 10:42 PM   #69
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So, I'm trying to understand this.

Are you doing this in order to report annual interest on your taxes - as opposed to reporting all of the interest at the end of the term?
YES, It was a 5 year annuity that i just renew for another 5 years. I was looking at annuitizing it but Sentinel would only pay 1% during that time. I was able to renew for 4% less the .08% for the Free yearly withdrawal that made it 3.92%.
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Old 05-13-2020, 10:55 PM   #70
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NO to be honest it might not be a MYGA its a fixed rate annuity like a CD. Its a Sentinelís Personal Choice Annuity now paying 3.10% but you have to leave it in for 5 years

https://sslco.com/content/personal-choice
AM Best B++. Kind of a sketchy credit.
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Old 05-13-2020, 10:57 PM   #71
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Interesting.
Good thought.
Would like to stay in a lower tax bracket but I would be open to any other ideas. In the these times I almost hate to take the 10% and get nothing for it. I might be better to wait and in 5 years to do a 1035 exchange to something i can annuitize?
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Old 05-13-2020, 11:02 PM   #72
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AM Best B++. Kind of a sketchy credit.
Please Brewer... you have to bring this up every time. How are you stocks and funds doing right now....its all a gamble. You have to be will to take chances to make more. I live in Oklahoma and its guaranteed by the STATE.
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Old 05-13-2020, 11:09 PM   #73
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If you're willing to take on a little risk, I like Vanguard Short-Term Federal Fund Admiral Shares (VSGDX)... SEC yield is 1.74%, Distribution yield is 2.03%, negligible credit risk and a smidgeon of interest rate risk (duration is 2.2 years).

For my taxable accounts, I like Vanguard Short-Term Tax-Exempt Fund Admiral Shares (VWSUX)... 1.38% SEC yield, 1.58% distribution yield and a duration of 1.3 years.
https://investor.vanguard.com/mutual...overview/vsgdx

Rates have come down, a lot.

As of 3/31/20, 2.2 yr duration VSGDX had a YTM of 1.1%. The fund pretty much parallels the 2yr Note. That’s about what 2yr Treasuries were on 3/31. As of 5/20, two year Treasury rates have declined to 0.2%. Take away the 0.1% fee, I think I’d expect to get about 0.1% in the next year.
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Old 05-13-2020, 11:09 PM   #74
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Please Brewer... you have to bring this up every time. How are you stocks and funds doing right now....its all a gamble. You have to be will to take chances to make more. I live in Oklahoma and its guaranteed by the STATE.
I exited the equity market before it fell, bought puts, and shorted cruise line and casino stocks. At the moment I am awaiting buying opportunities on a mountain of cash. I am doing very well, thank you for asking.

If you are going to deal with a weaker insurance company, please at least understand what you are buying. I get that insurance financials are impenetrable, which is why agency ratings are useful. You should really do some research and understand what the guaranty program consists of. This is not a general obligation of the state. If you decide that 3.1% is adequate compensation for taking exposure to a junky insurer, I hope it goes great. Just understand all the details. Personally, I do not typically buy junk fixed income for less than a 10% YTM or better.
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Old 05-13-2020, 11:19 PM   #75
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If you are going to deal with a weaker insurance company, please at least understand what you are buying.

This is what you said the last time on my post. It was proven that the type of annuity I have DID NOT have any FEEs.

Run. In a nutshell, annuities are generally a bad idea because they are generally extremely high fee, so complicated that it is unlikely you will understand what you are buying, and often you are exposed to the creditworthiness of the insurer.


I get that insurance financials are impenetrable, which is why agency ratings are useful. You should really do some research and understand what the guaranty program consists of. This is not a general obligation of the state. If you decide that 3.1% is adequate compensation for taking exposure to a junky insurer, I hope it goes great. Just understand all the details. Personally, I do not typically buy junk fixed income for less than a 10% YTM or better.
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Old 05-13-2020, 11:27 PM   #76
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You know you did not have to respond to anything I said, right?

I hope your annuity position works out great. I just encourage everyone to read the fine print and understand the risks you run to get your return. I certainly have made plenty of mistakes WRT the fine print and taking too much risk for too little reward. Would love to see others avoid my mistakes.

When it comes to insurers, I tend to have high standards for safety in part because the potential returns are always modest. YMMV.
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Old 05-14-2020, 03:00 AM   #77
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Bruno,

Why dont you just ignore brewer? Read back at his thread with razor, sometimes people have good information.. sometimes not

https://www.early-retirement.org/for...e-30317-4.html

I am fairly confident he wont be offended by the keyboard/internet warriors that are on this site.

I carefully select what I pull as valuable information from these threads... .the stock/housing market is gambling.. its not strictly about intelligence... sometimes its about experience or luck.. if brewer shorted what he said he did.. then .. he has experience we dont.. pick your info from people. Brewer has good advice .. just understand .. its free . i like his tax advice
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Old 05-14-2020, 04:42 AM   #78
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AM Best B++. Kind of a sketchy credit.
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Please Brewer... you have to bring this up every time. How are you stocks and funds doing right now....its all a gamble. You have to be will to take chances to make more. I live in Oklahoma and its guaranteed by the STATE.
I differ with my friend brewer with respect to the credit risk of annuities. IMO the credit risk of most annuities is negligible. He views it as buying a junk bond whereas I view it as buying a low investment grade bond.

The fact is that since regulatory reforms were put in place in the mid 1990s in the wake of the Executive Life and Mutual Benefit Life insolvencies, life and annuity insurer failures have been rare and there have been no significant failures (recognizing that if your insurer fails then it is significant to you). The vast majority of the life and health insurer failures recently have been health insurers and not life insurers (who issue annuities).

Insurers weathered 2008/2009 very well. While some were stressed, there were no significant failures (in fact, no failures that I can recall, conceding that there may have been some small ones). OTOH, there were numerous bank failures. That said, the insurance regulatory scheme is far from perfect, but it is pretty effective.

All of that said, Sentinel Security Life is towards the bottom of the barrel of life insurers so there is more credit risk buying an annuity from them vs a NML, MassMu, NY Life and the like.

It is not guaranteed by the state. There is a state guaranty fund that would step in if the insurer's assets were inadequate to fund its liabilities but that guaranty fund is funded by assessments against other insurers doing business in the state and is not a direct obligation of the state.
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Old 05-14-2020, 05:34 AM   #79
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OP - hopefully you have locked in your rate at ALLY with their no penalty 11 month CD.

Maybe other online banks have similar no-penalty CDs ?
If you are risk adverse this sounds like a good option.

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Old 05-14-2020, 07:10 AM   #80
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Just in case some don't look into corporate bonds.... normally when interest rates go down then bond prices go up.... with the economy upside down lately I have watched some corporate bonds where the premium was above par by 50% ($1500/sh) last year and of course we know interest rates are at zero you would expect the bond premium to be even higher... but instead they turned south... an example... a bond last years premium was 50% above par is now 10% below par at $900/sh but the bonds are still paying the same coupon as last year... so a bond that is paying 10% yrly coupon rate with premium of 10% below par ($900) is ylding ~12% .... so in other words... older corporate bonds that are paying higher coupons are now at bargain prices.... I'll take 10% any day over 1% and if you look for the maturing date of just a few more years you can lock in the 10% coupon rate, buy the bond at 10% below par and get the par value at the mature date... crazy time to be in these days...
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