Starting MYGA Investment

[jazz4cash]

I’m leaning towards using a MYGA ladder to replace my 5% PenFed CDs that mature in Jan. These CD-like annuity contracts are paying 2.4-3.0 % for 3-5 yr terms from issuers rated B+ or better. The Blueprintincome site has a lot of good info. Today I learned that many of these products have a rate lock feature. I can apply and lock in today’s rates and get 45 days to fund the account. The way rates are dropping that’s a great feature. I’m going to schedule a call to discuss the mechanics of setting up the investment this week.

 

[Dtail]

Yep, currently a nice substitute for CD's, if leaving them to maturity.
The question is if a 2008 scenario still develops, will the ratings on these companies be effectively overstated and thus exposing risk to principal?

 

[Jerry1]

I have one and I'm happy with my purchase of it, however, the early redemption fees are draconian. Careful with the amount you put in and the duration in order to make sure you can leave it until maturity. Mine doesn't have a rate lock, but it does have the ability to take the income each year. Just can't touch the principle. I'm good with that and will probably just leave it and let it compound.

 

[jazz4cash]

I don’t think any of these investments failed in ‘08. If so I believe the state guarantee fund would’ve come to the rescue. You could stick to higher rated insurers and/or spread your investment among several insurance companies. If we do go thru some catastrophic period that causes ratings to crater I think it means my risk is elevated but my return is fixed.

 

[Bruno]

Be sure to ask about the FREE 10% withdrawal each year. It gives you a chance to spread out the the interest earned yearly. I am getting 3.92 percent on MYGA and not sure i want to take the free withdrawal since there is no where to go to make any money.

 

[retired1]

opened a small MYGA with blueprint under Americo 5 yr term at 3.05%. Process took 2 weeks but rate was locked. Good experience so far. Plan to purchase few more

 

[pb4uski]

A little more risk, but there are numerous investment grade rated preferreds that pay more. Vanguard's Preferred Stock Screener shows 36 issues that are investment grade by both Moody's and S&P that have yields-to-worst of 3.5% or more. The Y-T-W of those 36 issues range from 3.56-4.96% and average 4.04%. YMMV.

https://personal.vanguard.com/us/StocksScreenerSec

 

[Koolau]

DW got hers by trading from an insurance policy that had a huge amount of cash value (due to its internal investment.) She likes the idea of knowing what it would be earning. I was sort of ho-hum on it because she'd been doing so well within the insurance contract. BUT, if mamma's happy.... YMMV

 

[jazz4cash]

I applied for the A rated Americo MYGA today at Blueprint Income. It's 5 yrs @3.05% I was looking for a 4-7 yr ladder but Americo just has a 5 yr, some other lower rated providers were not competitive IMO, and I did not want multiple new accounts anyway.
I was waiting for Jan when my CDs mature but I think rates may go down by then and I have a chunk in a MM so I decided not to wait. The application through Blueprint Income is pretty good so far. I had a call with them a couple of weeks ago to answer some questions but everything else is online/email. It is a little different from buying a CD.

 

[jazz4cash]

It’s not like buying a CD. I submitted an application but it has not been approved. The issuer requires some financial disclosure to assess suitability I guess. I don’t think they would approve if I was using up all my liquid assets for this purchase. Once they approve the application the rate gets locked and there is a window to fund. I’m very impressed with Blueprint income. I am working with the Co-founder. He says the issuer (Amerco) is picky and experiencing delays in processing new applications so it could be 30 days or more before the annuity is funded. It’s another instance where I believe it would be more efficient to have the current custodian (Fido) issue a check made payable to the annuity provider (FBO jazz4cash) since it is an IRA. Maybe next time.

 

[rkser]

I am following this informative thread

 

[Major Tom]

I am following this informative thread

To follow a thread, you can go to "Thread Tools" near the top of this page, towards the right-hand side. Click on it, and a menu will drop down. Then click on "Subscribe to this Thread".

 

[rkser]

Ok thanks, will do.

 

[jazz4cash]

One of the things I like about the Blueprint Income site is the transparency they provide. Thanks to the member here that first posted a link to Blueprint Income. I posted earlier that they will lock in your rate when you submit an application. I noticed that a few of the MYGA products were flagged for rates that were going to be lowered. Two days ago my rep told me that they generally get notified a week or two before a rate change and they had not been notified for the product I am buying. Today I see the Americo 5 yr MYGA is flagged and the rate will be dropping from 3.05 to 2.50. They also disclose that the 3.05 rate has been in effect since Oct 5th. My gamble on not waiting for my Penfed CD's to mature in Jan is working out in my favor. I am still waiting for final approval and funding, though.

EDIT: Actually the rate will drop on 12/5 (Saturday) so I guess the info about getting notified a week or two in advance is not accurate 100% of the time. i'm thinking they had a lot of
demand and their rate was well above even lower rated insurers. I see retired1 bought the same MYGA a couple weeks ago.

 

[jazz4cash]

Blueprint Income advised that the insurer has reviewed my application and assigned a policy number. Next step is a suitability review (3-5 days) followed by sending transfer request to Fido. Whew. Glad I got locked before the rate drop.

 

[jazz4cash]

Not meaning to dominate this thread but suspect the topic is of interest to many so I’m gonna throw in more chum....

I mentioned the transparency of the Blueprint Income but Stan the Annuity Man and immediateannuities.com are good also. Blueprint states their commission in the product details as 1.5% for the 5yr contract I applied for. Still waiting for final approval. Not sure how to think about that but I’m choosing to evaluate it as 1.5%/5yrs=0.30% annual expense. That’s consistent with my idea of a low cost investment. Interesting since I am not aware of too many benchmarks for cost on fixed income expenses.

 

[jazz4cash]

Finally received the annuity contract in the mail. Its about 60 pages long! I have a 20 day free look period before I am locked into this contract. It was a bit under 4 weeks to fund the contract and another month to deliver contract. It's not too complicated but it's still confusing and I have to call them to confirm my beneficiary designation since it is not stated anywhere on this paperwork. i don't see info about the free withdrawals either. I am going to try to actually read this thing at least once. Overall very satisfied.

 

[RetireeRobert]

Sorry, came in late on this thread. Terminology definitions please! "MYGA"? I deduce it is "something something guaranteed annuity", but definition at start for us newbies would have helped. Is it maybe "multi year guaranteed annuity? Or?

 

[Dtail]

Sorry, came in late on this thread. Terminology definitions please! "MYGA"? I deduce it is "something something guaranteed annuity", but definition at start for us newbies would have helped. Is it maybe "multi year guaranteed annuity? Or?

Multi Year Guaranteed Annuity.

 

[Koolau]

Multi Year Guaranteed Annuity.

We still have some that were called SPDA (Single Premium Deferred Annuity). I think they are virtually the same thing. The one DW took out a year ago is, I think, the MYGA. I think of them as a higher yielding but more restrictive (AND less guaranteed) Certificate of Deposit. YMMV

 

[RetireeRobert]

Multi Year Guaranteed Annuity.

OK, thanks!

 

[RetireeRobert]

I myself was considering what to do for higher yields on some of the cash I had sitting inside my IRAs. I chose to go the stock dividend route at the start of last spring when Covid knocked the market for a loop. I was able to nail down several quite juicy yields on strong stable company stocks at that time for the dividends. Including one cumulative convertible preferred stock in a REIT got me into double digits yield. But the market has recovered since then, and the stock dividend yields nowhere near as juicy now. So may need to consider other investments for my other "cash" piles to get something better than 1/2% or 1%.

 

[pb4uski]

We still have some that were called SPDA (Single Premium Deferred Annuity). I think they are virtually the same thing. The one DW took out a year ago is, I think, the MYGA. I think of them as a higher yielding but more restrictive (AND less guaranteed) Certificate of Deposit. YMMV

Yes, SPDA and MYGAs are the same. Where I worked we always called them SPDAs so the first time I saw MYGA used here I had to look it up.

Essentially the insurance industry's version of CD but with more onerous early withdrawal penalties and no FDIC insurance but sometimes higher crediting rates.

 

[pb4uski]

I myself was considering what to do for higher yields on some of the cash I had sitting inside my IRAs. I chose to go the stock dividend route at the start of last spring when Covid knocked the market for a loop. I was able to nail down several quite juicy yields on strong stable company stocks at that time for the dividends. Including one cumulative convertible preferred stock in a REIT got me into double digits yield. But the market has recovered since then, and the stock dividend yields nowhere near as juicy now. So may need to consider other investment s for my other "cash" piles to get something better than 1/2% or 1%.

You may want to peruse the threads on non-FDIC savings instruments and the preferred stock thread. I have both the DERI and Toyota IncomeDriver Notes (both are now 1.5%) and a portfolio of 36 different preferreds that collectively yield a little over 5.5%.

Duke Energy has a note program too but they only pay 1%.

https://www.early-retirement.org/forums/f28/non-fdic-deposit-account-programs-105827.html

https://www.early-retirement.org/fo...e-bad-and-the-in-between-2021-a-107188-2.html

 

[Koolau]

Yes, SPDA and MYGAs are the same. Where I worked we always called them SPDAs so the first time I saw MYGA used here I had to look it up.

Essentially the insurance industry's version of CD but with more onerous early withdrawal penalties and no FDIC insurance but sometimes higher crediting rates.

The good news is my SPDAs are paying around 5% which would be good today. Wish I had MORE! YMMV