Options for cash going forward

[Dtail]

+1 I also rarely play the bonus game but 2.5% for a year is attractive... I'll do $50k for me and $50k for DW... better than a one-year CD but a small risk that the 1.5% crediting rate might decline but if it does I'll just move the money out.

Thanks for the tips VungTau and mrfeh.

Parents have 50k in Ally HYS account.
Will probably make this move too for them.
Dollars here dollars there.

 

[Dtail]

I have a phone meeting with my Fidelity guy tomorrow, so I'll ask that question. I think DW and I are each going to get a 100K MYGA at 2%. Beats .37% I'm getting with my MM.

Already moved the taxable money to Ally and did the 1.5% no fee CD for most of it.

Will probably look to maybe get back into some shorter bond funds or ETFs.

Man, this sucks trying to find pennies on the street.

Please update us if you can.
Let us know if there is any gotchas if you don't mind.

 

[PatrickA5]

My parents are in the same boat, as their 5 year CD matured and I am just holding it in the FZDXX fund currently.
Fidelity spoke to me about the MYGA for 2.1% for 3 years. My parents will definitely not need the money in those 3 years, so might go for it.
Would you go through Fidelity?

Yes, I plan on going through Fidelity to buy the Mass Mutual MYGA. I have a scheduled phone call for tomorrow. Hopefully, it won't be below 2%. I'm not willing to go longer than 3 years.

I could probably find slightly higher yields from lower rated insurance companies outside the ones that Fidelity works with, but we really don't want our IRA money split out all over the place. We just got through simplifying our finances by moving everything over to Fidelity and now we're moving things out looking for a few bucks.

I'll report back after talking to my Fidelity guy.

 

[PatrickA5]

Please update us if you can.
Let us know if there is any gotchas if you don't mind.

Will do. I had a lengthy talk yesterday with a national Fidelity guy that is supposedly a licensed insurance broker. I really don't think there are any "gotchas" with these things as long as you are aware of the surrender fees and don't have any plans to take out money. Basically, the same as a CD.

You can take out 10% of the balance each year without penalty.

At the end, you can let it rollover automatically to another MYGA (at a lower rate 1.5%). You can buy a new MYGA. You can annuitize the money. Or, you can move the money roll it back to your original IRA.

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.

Like other retirement vehicles, if you're under 59 1/2 and withdraw the money you'll owe a 10% penalty. I'm not in that category.

 

[Dtail]

Will do. I had a lengthy talk yesterday with a national Fidelity guy that is supposedly a licensed insurance broker. I really don't think there are any "gotchas" with these things as long as you are aware of the surrender fees and don't have any plans to take out money. Basically, the same as a CD.

You can take out 10% of the balance each year without penalty.

At the end, you can let it rollover automatically to another MYGA (at a lower rate 1.5%). You can buy a new MYGA. You can annuitize the money. Or, you can move the money roll it back to your original IRA.

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.

Like other retirement vehicles, if you're under 59 1/2 and withdraw the money you'll owe a 10% penalty. I'm not in that category.

Thanks so much Patrick.
My parents monies are in a Taxable Trust account, so no issues there.
A minor point is transferring 3 years of interest at the end of the 3 year period into their regular taxable account and its tax brackets.

 

[Dtail]

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?

 

[Bruno]

You can take out 10% of the balance each year without penalty.

I do not have a FIDO MYGA but there was a small reduction on the interest rate for the Free 10% yearly withdrawal. I think it was .08%

 

[Bruno]

A minor point is transferring 3 years of interest at the end of the 3 year period into their regular taxable account and its tax brackets.

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.

 

[PatrickA5]

I do not have a FIDO MYGA but there was a small reduction on the interest rate for the Free 10% yearly withdrawal. I think it was .08%

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.

I know the New York Life MYGA that Fidelity offers uses MVA. The Mass Mutual I'm considering doesn't.

 

[Dtail]

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.

Interesting.
Good thought.

 

[PatrickA5]

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?

 

[calmloki]

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!

 

[pb4uski]

.... 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.

 

[pb4uski]

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

 

[PatrickA5]

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.

 

[Dtail]

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.

 

[pb4uski]

I'm kicking myself for not starting a taxable CD when I had the opportunity. Wasn't thinking... just did the IRA.

 

[Bruno]

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

 

[Bruno]

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%.

 

[brewer12345]

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

AM Best B++. Kind of a sketchy credit.

 

[Bruno]

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?

 

[Bruno]

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.

 

[gcgang]

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-funds/profile/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.

 

[brewer12345]

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.

 

[Bruno]

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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