MYGAs - exceeding State Guarantee Limits w/A+ rated companies

[24601NoMore]

Curious what everyone's comfort level would be exceeding the State Guarantee Limits ($250K per "life" in my State) with an A+ rated Fortune 100 company that has a Comdex score of 90?

We have a number of MYGAs with some now maturing, and it's been a royal PITA keeping track of all the different ways maturity is handled. Some companies have a liquidity window 30 days before maturity to do 1035 exchanges or withdrawals, some don't, some give you 30 days AFTER maturity before they auto roll you in to a brand new MYGA with the same duration (which in my case is usually 4-5 years).

There's one company (Nationwide) that I'm pretty comfortable with both because they're a Fortune 100 company that's been around ~100 years and are A+ rated. Plus, I've been on their campus many times as they're a former customer of mine. But we're maxed out there already. So, would any of you ever consider going beyond State Guarantee Limits?

Part of me says.."if anything ever happened to Nationwide, we have way bigger problems going on". But part of me says..don't be stupid..just deal with the hassle of different contract terms, different maturities, different everything and peanut butter spread the MYGA assets across multiple carriers.

Appreciate any/all opinions on this.

Thx..

 

[ShokWaveRider]

I have one that is with an A+ company (SPIA 10Y Period Certain) Not too worried.

 

[jazz4cash]

I guess it starts with your AA and tolerance for risk. MYGA is a fairly tiny position for me. In the case of a company like Nationwide, I’d be OK going moderately beyond the SGA limit. Beyond that I’d accept a slightly lower rate from a similarly high profile insurer. Generally speaking I think folks put too much faith in SGA coverage. It’s not nearly as good as FDIC.

 

[pb4uski]

...Part of me says.."if anything ever happened to Nationwide, we have way bigger problems going on".

That is exactly what I was thinking. Former client of mine as well.

OTOH, I suspect that they are offering 4.95% on a 5 year MYGA?

I can get 4.51% on a target maturity corporate bond ETF that matures in December of 2031 (IBDW iShares® iBonds® Dec 2031 Term Corporate ETF). If I blend in 20% of IBHK iShares® iBonds® 2031 Term High Yield and Income ETF I can get to 4.83% and have better liquidity if I ever need that money albeit with a little more credit risk. And I don't have to monkey around at all.

 

[pb4uski]

I guess it starts with your AA and tolerance for risk. MYGA is a fairly tiny position for me. In the case of a company like Nationwide, I’d be OK going moderately beyond the SGA limit. Beyond that I’d accept a slightly lower rate from a similarly high profile insurer. Generally speaking I think folks put too much faith in SGA coverage. It’s not nearly as good as FDIC.

I agree on the last part, BUT the surveilance and regulation of insurers is a lot stronger than that of banks so your chance of needing that SGA coverage is IMO a lot lower than your chance of needing FDIC coverage for a bank product.

Ther have been 18 bank failures requiring FDIC intervention from 2019 to 2026 YTD vs 3 annuity insurers. Now that said, if the worst happens, FDIC resolution is typically over the weekend where annuity workouts can take years.

 

[GenXguy]

I wouldn't even invest to the limit, because I'm going to let it sit and gain over time rather than taking distributions over the 6 years or whatever term it is. A key point is delaying all interest income for some years vs CDs while on the ACA and trying to keep MAGI low for better subsidies.

 

[Koolau]

I suppose it's like any other investment. How much can you afford to lose? We make that "bet" every time we invest in (for instance) the stock market. So, for an A+ I don't think I'd worry - assuming it wouldn't kill your retirement in the off chance there was a failure. YMMV