Options for cash going forward

[brewer12345]

Fill FREE to put me on your IGNORE list [mod edit]

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.

 

[lordjust]

Fill FREE to put me on your IGNORE list [mod edit]

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/forums/f28/record-dow-whee-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

 

[pb4uski]

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.

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.

 

[FIREarly]

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.

--
Not advised, if you want much higher risk, invest in TSLA and MSFT!!
{insert picture of rollercoaster}

 

[dixter]

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...

 

[dixter]

also.... you guys/gals do know the FED is propping up the muni markets too.... there are bargains in the muni market right now also... some are tax free....

you don't have to hold any bond for any length of time... you can buy them today and sell them the next day if you changed your mind... or they went up in value and you want to cash out instead....

 

[brewer12345]

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...

Ten percent coupon is a pretty junky issuer. Tread carefully.

 

[capjak]

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

It is a MYGA, B++ AMBEST Rated for 5 years is likely low risk, but I am very conservative so I have a A+ Rated MYGA with Mutual of Omaha at 2.65% (quite a bit lower than 3.1% but it's A+ rated).

 

[dixter]

Ten percent coupon is a pretty junky issuer. Tread carefully.

I sat down with a adviser many years ago and asked about that question as I noticed many companies get down graded over time even when they had been paying coupons regularly for many many years at high coupons.. and what I got out of that meeting was, some bonds get taken out of the general listing as they compete with lower paying bonds BBB rating or above, while still being a good company to invest in....

so in other words I take note of the bond ratings and do my own " feel good " and choose a bond that way...

at this very moment if you look at the Fidelity Fixed Income page it lists BBB rated bonds with coupons of 9% for 3 yr...

if you look at the municipal it lists AA rated bonds at 6% coupon for 10 yr, tax free....

one mans junk is another mans treasure...

 

[jazz4cash]

I sat down with a adviser many years ago and asked about that question as I noticed many companies get down graded over time even when they had been paying coupons regularly for many many years at high coupons.. and what I got out of that meeting was, some bonds get taken out of the general listing as they compete with lower paying bonds BBB rating or above, while still being a good company to invest in....



so in other words I take note of the bond ratings and do my own " feel good " and choose a bond that way...



at this very moment if you look at the Fidelity Fixed Income page it lists BBB rated bonds with coupons of 9% for 3 yr...



if you look at the municipal it lists AA rated bonds at 6% coupon for 10 yr, tax free....



one mans junk is another mans treasure...

Ok, you made me look! I think I see the bonds you cited, but the coupons are only 5%. It’s a good rate but not worth the risk for me. The muni only pays 3% YTM since it’s offered at a premium. A month or so ago there were great opportunities.

 

[PatrickA5]

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

Finished application (through Fidelity) for a couple of Mass Mutual 3 yr, 2% MYGA's. My Fidelity guy did most of the work and verified I had a good handle on things. No gotchas. Very straight forward.

Will take a week or so for the direct rollover to Mass Mutual (Traditional IRA's) and another few days for the annuities to show back up on the Fidelity site.

Probably less hassle factor than buying a CD from a new bank.

 

[dixter]

Ok, you made me look! I think I see the bonds you cited, but the coupons are only 5%. It’s a good rate but not worth the risk for me. The muni only pays 3% YTM since it’s offered at a premium. A month or so ago there were great opportunities.

The muni actually has a coupon of 6% tax free... the YTM is only if you hold the bond until maturity... the maturity date is 2029... so you pull 6% tax free for a couple years and you sell the bond at above par to break even on the cost.. you still get 6% tax free each year... thats now... not a month ago...

been doing this for 40 yrs.. I have only been burned once by muni bonds... and that was when Washington state defaulted on bonds they issued for a atomic electrical generation plant... didn't loose much cause I didn't have that much to loose in those days...

 

[Dawg52]

Finished application (through Fidelity) for a couple of Mass Mutual 3 yr, 2% MYGA's. My Fidelity guy did most of the work and verified I had a good handle on things. No gotchas. Very straight forward.

Will take a week or so for the direct rollover to Mass Mutual (Traditional IRA's) and another few days for the annuities to show back up on the Fidelity site.

Probably less hassle factor than buying a CD from a new bank.

Ha....I bought one this afternoon too through Fidelity. Went as you described.

 

[Dtail]

Finished application (through Fidelity) for a couple of Mass Mutual 3 yr, 2% MYGA's. My Fidelity guy did most of the work and verified I had a good handle on things. No gotchas. Very straight forward.

Will take a week or so for the direct rollover to Mass Mutual (Traditional IRA's) and another few days for the annuities to show back up on the Fidelity site.

Probably less hassle factor than buying a CD from a new bank.

Thanks for the update.
2 questions:
1) Any particular reason you picked Mass Mutual over NY Life?
2) Were there any (hidden) fees?

 

[Bruno]

Bruno,

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

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..

Thank You ..I think I would have liked Razor.

 

[Bruno]

I differ with my friend brewer with respect to the credit risk of annuities. IMO the credit risk of most annuities is negligible.

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.

Thank You Pu4uski!! I also believe the last time you pointed out to brewer if I recall correctly none of these Annuities companies have ever folded up. I hope this is correct.

I looked back and this is what you said.
It is because the subject was credit risk of buying an annuity and the link that you shared listed insolvencies where many of the companies, especially the more recent insolvencies, were not annuity writers at all.

 

[PatrickA5]

Thanks for the update.
2 questions:
1) Any particular reason you picked Mass Mutual over NY Life?
2) Were there any (hidden) fees?

Mass Mutual was 2.0% and New York Life was 1.9%. My Fidelity guy said both were around 1.6% a few weeks ago and then had a little price war bringing them to 2.1%. Both dropped at the beginning of this week.

No hidden fees.

 

[Dtail]

Mass Mutual was 2.0% and New York Life was 1.9%. My Fidelity guy said both were around 1.6% a few weeks ago and then had a little price war bringing them to 2.1%. Both dropped at the beginning of this week.

No hidden fees.

Okay excellent.

 

[Spock]

Mass Mutual was 2.0% and New York Life was 1.9%. My Fidelity guy said both were around 1.6% a few weeks ago and then had a little price war bringing them to 2.1%. Both dropped at the beginning of this week.

No hidden fees.

What area of the Fidelity web page are you fishing on to find these?

 

[Dawg52]

What area of the Fidelity web page are you fishing on to find these?

Under fixed income products but here is a direct link.

https://fundresearch.fidelity.com/annuities/spda-rates/?refann=001

 

[pb4uski]

Under fixed income products but here is a direct link.

https://fundresearch.fidelity.com/annuities/spda-rates/?refann=001

Just be sure that you will stay the entire term.... 7% surrender charge... equal to the first ~3.5 years of interest.

 

[Dawg52]

Just be sure that you will stay the entire term.... 7% surrender charge... equal to the first ~3.5 years of interest.

Oh yeah. I've got lot's of cd's unfortunately maturing over the next 2 years. No need to touch the annuity. And i keep a chunk sitting in a money market fund.

 

[PatrickA5]

Oh yeah. I've got lot's of cd's unfortunately maturing over the next 2 years. No need to touch the annuity. And i keep a chunk sitting in a money market fund.

If you absolutely had to, you can withdraw 10% per year from these annuities without surrender fee.

 

[Dawg52]

If you absolutely had to, you can withdraw 10% per year from these annuities without surrender fee.

Yes my Fidelity advisor mentioned that. So that is a nice feature if you have to.

 

[Spock]

Under fixed income products but here is a direct link.

https://fundresearch.fidelity.com/annuities/spda-rates/?refann=001

danke!