Can one have too many Annuities? Specifically MYGAs (CDs) and/or SPIAs

[ShokWaveRider]

We currently have 3 MYGAs that we basically treat like a CD from any other institution. All are under our State Guarantee rate (</= $250k). I checked with our states guarantee department and all the insurance companies we have are in good standing and have been for decades.

Due to the lack of comparable Bank or CU CDs we are considering one more. All ours are laddered 6, 5 & 3 years and have an annual 10% annual no fee withdrawal policy. We are thinking of getting a 3 or 4 year to fill the gap. I would prefer a 4 year but unfortunately 3 years are paying more at the moment.

We may consider a SPIA in the future but no fixed plans there. All our other nest egg is in CDs with various institutions all paying in excess of 5% and none are callable.

One is maturing soon and the only option for decent fixed income return for terms over 1 year to 18 months are MYGAs. I am not comfortable with corporate or other type of longer term bonds. I do not invest in anything anymore over 5 years.

What do the fixed income investors here think?

 

[jazz4cash]

I am a big fan of MYGAs but I have similar concerns. I would do it while staying under the SGA limits but I just hate the complication of dealing with so many companies. I really like Blueprint income but they do a lousy job as a consolidator. I have to look on insurer’s site to see current balances. Customer service response has been slow on my requests for withdrawals and transfers. Right now I am buying bonds instead.

 

[Al18]

You are doing everything correctly to protect your MYGA and CD investments from failure, with the exception of inflation protection. As a long time CD investor myself, I can say CD interest has never maintained pace with inflation over periods of 5 years or more. That’s why many financial experts recommend a stock/fixed income allocation ratio from 80/20 to 20/80.

 

[ShokWaveRider]

I am a big fan of MYGAs but I have similar concerns. I would do it while staying under the SGA limits but I just hate the complication of dealing with so many companies. I really like Blueprint income but they do a lousy job as a consolidator. I have to look on insurer’s site to see current balances. Customer service response has been slow on my requests for withdrawals and transfers. Right now I am buying bonds instead.

I am with BPI, I have never had any issues with them or their support. They have managed my withdrawals fine. I always go to the Ins. Co.'s direct for balance updates every month with no issues either.

 

[VanWinkle]

Recently into 3,4,and 5 year MYGA Ladder for SO's fixed income. she unwound several fixed indexed
annuities and 1035 into MYGAs once the penalty phase was over. So far, I am a fan but they are still in
the first year with no withdrawals yet. I would use them in conjunction with some equity exposure to
keep up with inflation. I am at 50/50 and she is slowly investing MM account money into the market
to reach 50/50 also. I would keep some in cds if I have no other liquid assets.

 

[RetiredHappy]

My spouse decided to go to 20% Fixed Income just because the recent stock market crash. He has a 5-year one that is maturing next year (lousy interest rate), and he bought 2 5-year and 1 6-year one then, also before the interest rate dropped.

He now has 4 MYGAs, with 4 different insurance companies, and under the State Guarantee Limit. The MYGAs allow a 10% withdrawal each year and we had been doing that with the one that is maturing next year. Based on my calculation, he should not need to make the 10% withdrawal each year to meet RMD until the 4th year of his 3 new MYGAs. We want to have the money compound under their favorable interest rates.

My own IRA money all went into deferred fixed income term annuities.

 

[Koolau]

We cashed our last MYGA but still retain two very old SPDAs (very similar to MYGA.) I don't think there is an appropriate number of these instruments as long as they fit in with your asset allocation.

 

[Yoheadden]

I have no experience with MYGAs or any annuities for that matter, but I recently watched this video and knew there had to be a thread on here about the topic.
For those that have used a MYGA ladder strategy:

is there a particular life period that you used it for (years before SS, etc)?
Used as the fixed income/bond portion of your portfolio?
When purchased out of an IRA, unless you use the interest/principal either during the term or upon completion of the term, does it get transferred back into the IRA and institution where it came from?

Besides the extra work required to set them up, this seems like an interesting strategy considering what might happen with interest rates in the coming years.

 

[RetiredHappy]

When purchased out of an IRA, unless you use the interest/principal either during the term or upon completion of the term, does it get transferred back into the IRA and institution where it came from?

If you use non-IRA money, interest and principal stays in your taxable account. It can never go into IRA.

You would use it a fixd income in your equities-fixed income mix. There is no particular timing, MYGA pays more than CDs. I dislike bonds so I cannot compare with bonds.

 

[jazz4cash]

I am with BPI, I have never had any issues with them or their support. They have managed my withdrawals fine. I always go to the Ins. Co.'s direct for balance updates every month with no issues either.

Pretty much the same here. I guess I didn’t realize BPI would handle withdrawals. I do really like Blueprint Income for annuity sales. Their website has the most info and transparency on the products they sell IMO. Communication with their reps feels very personal, they have insights and can nudge things along sometimes. Once the deal is done it’s a bit different. When I check my account on their website, it is not updated at all. As you say I have to go onto the insurers website which I didn’t expect. If I use other insurers due to rates or staying under the SGA limit, I’ll need an account at each insurer’s website which adds complexity. I have dozens of bonds and CDs bought through Fidelity and they have everything I need to know in one spot.

 

[pletal]

We currently have 3 MYGAs that we basically treat like a CD from any other institution. All are under our State Guarantee rate (</= $250k). I checked with our states guarantee department and all the insurance companies we have are in good standing and have been for decades.

Due to the lack of comparable Bank or CU CDs we are considering one more. All ours are laddered 6, 5 & 3 years and have an annual 10% annual no fee withdrawal policy. We are thinking of getting a 3 or 4 year to fill the gap. I would prefer a 4 year but unfortunately 3 years are paying more at the moment.

We may consider a SPIA in the future but no fixed plans there. All our other nest egg is in CDs with various institutions all paying in excess of 5% and none are callable.

One is maturing soon and the only option for decent fixed income return for terms over 1 year to 18 months are MYGAs. I am not comfortable with corporate or other type of longer term bonds. I do not invest in anything anymore over 5 years.

What do the fixed income investors here think?

I have at least 14 different MYGA’S with 8 different companies, have not had an issue. Lots of items to keep up with but by doing research I am making more money every year. Beats working

 

[Koolau]

I have at least 14 different MYGA’S with 8 different companies, have not had an issue. Lots of items to keep up with but by doing research I am making more money every year. Beats working

Just me being nosy, but it sounds like your MYGAs are a very significant portion of your asset allocation.

I like MYGAs/SPDAs for my fixed income allocation (as opposed to CDs - usually.)

 

[pletal]

Just me being nosy, but it sounds like your MYGAs are a very significant portion of your asset allocation.

I like MYGAs/SPDAs for my fixed income allocation (as opposed to CDs - usually.)

Yes, they are about 20% of my investments. Very conservative. Very little in market <10%. I invest in small business start ups instead.

 

[Exchme]

Yes, they are about 20% of my investments. Very conservative. Very little in market <10%. I invest in small business start ups instead.

This is anything but "very conservative"! Putting 70% of your portfolio into funding start-ups is extremely high risk - far, far riskier and less liquid than the overall stock market.

A downturn hurts a total market approach but it will recover, a downturn could leave your portfolio devastated.

 

[pletal]

This is anything but "very conservative"! Putting 70% of your portfolio into funding start-ups is extremely high risk - far, far riskier and less liquid than the overall stock market.

A downturn hurts a total market approach but it will recover, a downturn could leave your portfolio devastated.

Sorry, you may have misunderstood. Much of my money is in CD’s also. Startups are less than 5% of my total investments.

 

[Koolau]

Sorry, you may have misunderstood. Much of my money is in CD’s also. Startups are less than 5% of my total investments.

Ah, yes. That IS conservative. If it w*rks for you, that's great. I'm about 1/3 in equities to (hopefully) counter the effects of inflation but YMMV.

Thanks for sharing.

 

[VanWinkle]

Yes, they are about 20% of my investments. Very conservative. Very little in market <10%. I invest in small business start ups instead.

Investing in small business start ups does not sound conservative with the failure rate of small business.
I'm curious how you qualify a small business as investment qualified?

 

[pletal]

Investing in small business start ups does not sound conservative with the failure rate of small business.
I'm curious how you qualify a small business as investment qualified?

Great question. Mostly invest in business that I know about, expansion from established business to new location and new corporation set up. Also keep books on a couple of them (for a few) so lightly hands on. some have fared better then others. Don't really follow hype on flavor of the day business models.