What to do with Fixed Income

[pb4uski]

Thanks Montecfo,

As you can see, I am still learning the ropes of fixed income, finally gradually getting out of long held BND after being bruised .

Anyway --

I see a 3 yr MYGA, a deferred Annuity at 5% at Fidelity by USAA a A++ company as usually all companies at Fidelity are, I am pretty sure I will not NEED the money for 3 yrs.

Where as a 1 yr CD is at around 4.2%, does not get much higher at 3 yrs.

I am looking to invest just $100k, much lower than the $250k Annuity guarantee limit.

What do you guys think ? any thoughts ......

Reasonable deal methinks, but just know if you need that $100k in the next 3 years then you'll only be able to access 10% each year without a substantial surrender penalty (similar to an early withdrawal penalty on a bank CD).

Meanwhile, with a CD or Treasury you can sell at any time without penalty.

If you can live with that constraint then it's a contender.

 

[pb4uski]

I was savvy enough to get out of my Bond ETF in 2022, a lesson I first learned way back in 1980. I'm now looking for Actively Managed Bond Mutual Funds that I can put on my Watch List. I'm not sure what the FOMC's next move will be, but if we get some direction about lower rates.,.,.,.,I'd like to have a good Bond Mutual Fund on my radar.

Montecfo, any suggestions on that front ??

Not Montecfo here, but I find the Blackrock iBond and Invesco Bulletshares target maturity bond ETFs interesting. They have different series that mature in a specified year and the fund makes a terminal distribution in December of each year. I don't see any need for there for Treasuries target maturity ETFs since you can just invest in Treasuries on your own. I find them most interesting for corporate bonds but not at current corporate spreads to Treasuries, which are particularly narrow last time I checked.

 

[rkser]

I see another MYGA at Canvass, a 3 yr MYGA at 6% from a B++ rated insurance company Puritan Future Fund.

I am trying to figure out in my mind ??X*&%,
how risky would be a AM best rating of B++ (GOOD ability to pay ) at 6% VS A++ rated USAA(Excellent ability to pay) at 5%
The Principal is $100k.

Any thoughts.........

 

[RetiredHappy]

I would go with a minimum of A. Won't even touch an A-. Last year my husband bought 3 MYGAs (5/6/7 years), ranged from A to A+. American National/Oxford Life/National Life. He has another 5-year one that matures this year which is A++ (New York Life).

 

[Al18]

I’ve looked at MYGA and I just don’t want to go chasing an extra 1% at a lower rated insurance company. My largest holding is FBALX, a 60% stock/40% bond fund which has a CAGR over the past 10 years of 9.92%.

 

[Chuckanut]

This month I’ve had a callable CD called, and as of today two Agency bonds called. I’d have to check my records but I think I only have one callable agency bond left. Win some, lose some.

 

[rkser]

I am leaning towards the USAA A++ rated 5% MYGA from Fidelity

 

[RetiredHappy]

Good decision. What I like about buying through Fidelity is that the holding shows up on the Fidelity portfolio screen. It is the case with NY Life that my husband bought through Fidelity. The other 3 that he bought last year through Immediateannuities, he added the client portal/links onto the dashboard but nothing is integrated. RMD doesn't show up those 3 companies on the Fidelity dashboard and the American National link has been broken since December.

 

[Koolau]

What pot of money are folks thinking of committing to MYGAs at this time? I like the current rates, but I would have to take money from my 401(k) which is a taxable event and might crowd my IRMAA limit. Do you all have lots of fixed money "laying around" in other funds ready to redeploy? Thanks for any replies.

 

[RetiredHappy]

What pot of money are folks thinking of committing to MYGAs at this time? I like the current rates, but I would have to take money from my 401(k) which is a taxable event and might crowd my IRMAA limit. Do you all have lots of fixed money "laying around" in other funds ready to redeploy? Thanks for any replies.

You don't take it out from 401K / IRA, you simply buy MYGA within the tax deferred account.

You can also buy MYGA from taxable accounts.

 

[pb4uski]

This month I’ve had a callable CD called, and as of today two Agency bonds called. I’d have to check my records but I think I only have one callable agency bond left. Win some, lose some.

+1. I've had a few calls over the last month or so and the dry powder is accumulating

 

[FiveDriver]

I think you want to avoid bond index funds. Not just due to the poor recent performance, but because of the non-selective nature of the holdings. Equities and bonds are not the same. Indexing works great for equities. Not as well for bonds.

In my opinion you want active management of your bond allocation. Bond market sectors do not move in lockstep. Expertise is needed to capture the best return.

I agree with your Opinion here. I found on Fidelity's Learning Center page, a very good article about this subject.

Where Bonds are concerned, the lack of data can be a problem.
Conversely, too much data can also be a problem......heh-heh.

Lots of information to digest here --

Investing | active bond funds | Fidelity

Bond investors may benefit from actively managed mutual funds and ETFs. Learn more here.

www.fidelity.com

 

[Montecfo]

Thanks Montecfo,

As you can see, I am still learning the ropes of fixed income, finally gradually getting out of long held BND after being bruised .

Anyway --

I see a 3 yr MYGA, a deferred Annuity at 5% at Fidelity by USAA a A++ company as usually all companies at Fidelity are, I am pretty sure I will not NEED the money for 3 yrs.

Where as a 1 yr CD is at around 4.2%, does not get much higher at 3 yrs.

I am looking to invest just $100k, much lower than the $250k Annuity guarantee limit.

What do you guys think ? any thoughts ......

I am not knowledgeable of the MYGA so perhaps others can comment.

 

[Montecfo]

I was savvy enough to get out of my Bond ETF in 2022, a lesson I first learned way back in 1980. I'm now looking for Actively Managed Bond Mutual Funds that I can put on my Watch List. I'm not sure what the FOMC's next move will be, but if we get some direction about lower rates.,.,.,.,I'd like to have a good Bond Mutual Fund on my radar.

Montecfo, any suggestions on that front ??

Well there is a large menu. Here are a few I either currently own or have owned: Dodge & Cox income (DODIX), DoubleLine Total Return Bond (DBLTX), T Rowe Price Floating Rate
(PRFRX), a stalwart during rate hike cycles, Pimco Income (PIMIX).

Most of my portfolio is in individual bonds but using funds adds flexibility and diversification. And these are easy to buy and sell.

I also like the Bulletshares but have never owned. I think you càn build a ladder with them, easily buy and sell, and use a mixture of categories to dial in your risk.

Suggest you research these in the issuer's websites and/or Morningstar.Know what you own.

 

[Al18]

I checked Fidelity today and I didn’t see any MYGA’s listed. I did see a USAA annuity at 5%, however that is a deferred annuity and you can’t make partial withdrawals without paying a 7% penalty. FYI most MYGAs let you withdraw 5%-10% per year without a penalty, depending on the contract terms.

 

[FiveDriver]

Well there is a large menu. Here are a few I either currently own or have owned: Dodge & Cox income (DODIX), DoubleLine Total Return Bond (DBLTX), T Rowe Price Floating Rate (PRFRX), a stalwart during rate hike cycles, Pimco Income (PIMIX).

Thank You Sir.
Starting my research tonight. I've been recently looking into the Floating Rate Funds, specifically Fidelity FFRHX.....The TRowe Fund appears better at first glance.

 

[RetiredHappy]

I checked Fidelity today and I didn’t see any MYGA’s listed. I did see a USAA annuity at 5%, however that is a deferred annuity and you can’t make partial withdrawals without paying a 7% penalty. FYI most MYGAs let you withdraw 5%-10% per year without a penalty, depending on the contract terms.

Fidelity calls it deferred annuities as opposed to MYGAs, it's the same thing. USAA is in the 5th column here. You can withdraw 10% annually. This is copied from the Fidelity website.

 

[Al18]

Thanks for the clarification.

 

[Alex The Great]

Hi yield usually trades like equity. Don't you want something less correlated in your bond portfolio? Your equity allocation should be doing the heavy lifting.

Like equities? It depends. Lately, I've been in SPHY. It does not move much. For the entire 2024 (and pretty much for 2023 as well), it was between 22 and 24 and it is still pretty low due to the interest rates I guess. But those are mostly junk bonds and may not for everyone. The part I have in 401K is ~15% which does not affect much the entire thing.

 

[pb4uski]

I don't mind the extra work of managing individual CD's and Treasuries ...

Same here, but if I get hit by a beer truck I'm sure DW will be uninterested. For those uninterested like DW I think I would advise a ladder of corporate bond target date maturity ETFs and a 10-rung Treasury ladder for the fixed income allocation. That would be 20 tickers for a 10-year ladder and only require attention once a year.

 

[FiveDriver]

Just to throw another log on the fire --

One of the Bond Funds on my Watch List is ZROZ Pimco's 25 Year Zero Coupon Treasury Fund. And it's jumping today, up way more than TLT.

All the Bonds are up this morning, but this Zero Coupon Fund is really on the move. I don't pretend to understand why......just an observation.

 

[Montecfo]

Like equities? It depends. Lately, I've been in SPHY. It does not move much. For the entire 2024 (and pretty much for 2023 as well), it was between 22 and 24 and it is still pretty low due to the interest rates I guess. But those are mostly junk bonds and may not for everyone. The part I have in 401K is ~15% which does not affect much the entire thing.

I was referring to over an entire market cycle. Junk bonds did better than investment grade generally in the selloff because of the higher yield. Probably will continue to do so if rates drop further. Tactically I can see it.

I bought some preferreds in closed-end funds tactically for similar reasons. But won't be holding them into a hike cycle.

But generally speaking I would prefer less correlated holdings. The preferreds I view as equity. I would view junk bonds the same way.

 

[Phroig]

For taxable money, high-yield muni funds are looking attractive here with (federal) tax-free yields of around 4%.

 

[tulak]

I keep it simple. All fixed income goes into TIPS. I’ll probably get 4-5% nominal, around 2% real guaranteed.

And I maintain a high equity allocation. That’s where I expect growth. FI is for preservation of capital, inflation adjusted.

 

[rkser]

For my understanding / or lack of -

A all equity Taxable & Roth &
Pre Tax IRAs with Fixed Income with CDs, MYGAs & decreasing BNDs is making sense.

A couple of years of living expenses are included in the Taxable.

Living expenses from Dividends from Taxable + selling equity as needed.

Roth Conversions from the IRA, leading to a progressively higher equity portfolio.

Under the Reporting radar Yearly Gifting to children from transferring equity shares

At least that is the plan, we will see how this goes.