MYGA in Inherited IRA

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Topic Author
RubyTuesday
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MYGA in Inherited IRA

Post by RubyTuesday »

Anyone have any experience buying a MYGA (multi-year guaranteed annuity) in an inherited IRA?

I have an inherited IRA from my parent who passed in 2020. I will need to withdraw all the funds by 12/31/2030. I currently have some of my FI assets in the account. I was thinking of transferring to an insurance company and purchasing a 8 or 9 year MYGA. On maturity I would just withdraw full amount as taxable income (it’s not that large and I will plan accordingly for the taxes).

Anyone have any relevant experience or see any concerns with this approach?

One question is which if any insurers will handle an inherited traditional IRA.

I plan on reaching out to blueprint income and seeing what they have to say.
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
Lee_WSP
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Re: MYGA in Inherited IRA

Post by Lee_WSP »

Do you even want an annuity? If so, what type of annuity are you looking to buy? Have you looked into a charitable remainder trust? Either the annuity or unitrust version.
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Stinky
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Re: MYGA in Inherited IRA

Post by Stinky »

I’d definitely reach out to Blueprint Income. I wouldn’t have any idea as to which companies might issue a MYGA into an inherited IRA.

Beyond that, I don’t see any particular issues with what you’re proposing. You’re understanding that you’re locking up the money for 8-9 years at (hopefully) an attractive interest rate, and getting full principal and interest back at the end of the term. The same as any other MYGA.

Please post back and let us know what you hear from Blueprint.
It's a GREAT day to be alive! - Travis Tritt
Topic Author
RubyTuesday
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Re: MYGA in Inherited IRA

Post by RubyTuesday »

Lee_WSP wrote: Sat Jun 12, 2021 12:28 pm Do you even want an annuity? If so, what type of annuity are you looking to buy? Have you looked into a charitable remainder trust? Either the annuity or unitrust version.
Not specifically looking for an annuity, just basically looking to maintain part of my fixed income in the inherited IRA until I have to withdraw it in just under 10 years. I see MYGAs as a potential fixed income asset product especially since I don’t mind tying up the money without withdrawals for 9 years.

I’ve read some about CRTs and don’t understand how they are applicable to my situation, could you elaborate why you bring them up?
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
Topic Author
RubyTuesday
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Re: MYGA in Inherited IRA

Post by RubyTuesday »

Stinky wrote: Sat Jun 12, 2021 12:41 pm I’d definitely reach out to Blueprint Income. I wouldn’t have any idea as to which companies might issue a MYGA into an inherited IRA.

Beyond that, I don’t see any particular issues with what you’re proposing. You’re understanding that you’re locking up the money for 8-9 years at (hopefully) an attractive interest rate, and getting full principal and interest back at the end of the term. The same as any other MYGA.

Please post back and let us know what you hear from Blueprint.
Thanks. Looks like rates are around 2.8-3.2% depending on term, withdrawal restrictions, and financial rating. But the details avail on blueprint don’t mention inherited IRAs so I’ll reach out next week.
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
Lee_WSP
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Re: MYGA in Inherited IRA

Post by Lee_WSP »

RubyTuesday wrote: Sat Jun 12, 2021 12:45 pm

I’ve read some about CRTs and don’t understand how they are applicable to my situation, could you elaborate why you bring them up?
It replicates the Stretch IRA, but if the tax burden from withdrawing the entire amount is small or non existent, tax minimization strategies may not matter to you. Usually usually the goal is to minimize the tax burden on an inherited IRA.

If the rates are the same today and in ten years does not matter whether you withdraw the money now or in ten years. Expressed as:

Tax rate x (IRA x annual compounded growth over ten years) vs. tax rate x IRA x annual compounded growth rate over ten years

The result is the same. You only come out ahead if you are able to reduce that tax burden by staying within your current brackets. But like you said, if it doesn’t bump you up to a new bracket, it doesn’t matter and you might as well just withdraw it all and simplify your spreadsheets.
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RubyTuesday
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Re: MYGA in Inherited IRA

Post by RubyTuesday »

Lee_WSP wrote: Sat Jun 12, 2021 12:52 pm
RubyTuesday wrote: Sat Jun 12, 2021 12:45 pm

I’ve read some about CRTs and don’t understand how they are applicable to my situation, could you elaborate why you bring them up?
It replicates the Stretch IRA, but if the tax burden from withdrawing the entire amount is small or non existent, tax minimization strategies may not matter to you. Usually usually the goal is to minimize the tax burden on an inherited IRA.

If the rates are the same today and in ten years does not matter whether you withdraw the money now or in ten years. Expressed as:

Tax rate x (IRA x annual compounded growth over ten years) vs. tax rate x IRA x annual compounded growth rate over ten years

The result is the same. You only come out ahead if you are able to reduce that tax burden by staying within your current brackets. But like you said, if it doesn’t bump you up to a new bracket, it doesn’t matter and you might as well just withdraw it all and simplify your spreadsheets.
Ok, got it. I’ll need to think about it. Right now, in early retirement I have a small amount of 0% LTGC space and very low ord income rate. The inherited IRA is currently only about $56k so while it would currently bump me into different bracket, it isn’t a big deal. My thinking is that in several years we will not have any 0% LTGC space and I’ll probably withdraw all of this and do a Roth conversion at same time to just go ahead and blow through the cap gains bump zone.
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
Alan S.
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Re: MYGA in Inherited IRA

Post by Alan S. »

RubyTuesday wrote: Sat Jun 12, 2021 12:19 pm Anyone have any experience buying a MYGA (multi-year guaranteed annuity) in an inherited IRA?

I have an inherited IRA from my parent who passed in 2020. I will need to withdraw all the funds by 12/31/2030. I currently have some of my FI assets in the account. I was thinking of transferring to an insurance company and purchasing a 8 or 9 year MYGA. On maturity I would just withdraw full amount as taxable income (it’s not that large and I will plan accordingly for the taxes).

Anyone have any relevant experience or see any concerns with this approach?

One question is which if any insurers will handle an inherited traditional IRA.

I plan on reaching out to blueprint income and seeing what they have to say.
As far as I know, it has been near impossible to find an insurer who will annuitize an inherited IRA that was not already annuitized by the decedent. One of the reasons may be the complex RMD rules that apply to annuities. The IRS wants to limit any annuity term from extending the deadline to fully distribute an inherited IRA, which is known as the "applicable distribution period".

But perhaps the new 10 year rule will simplify the issue since such inherited IRAs have no annual RMDs and a clear deadline for full distribution not relating to anyone's life expectancy. The insurance company would only need to be concerned with the annuity term ending before the end of the 10 year rule. Such a product would also spread out the taxes over the 10 or 11 tax years and eliminate the tax bomb in the final year if annuitized. MYGAs are not normally annuitized, so the tax bomb would still be a problem for larger premiums.



Let us know if you find any insurers that offer anything in this area.
Last edited by Alan S. on Sat Jun 12, 2021 2:41 pm, edited 2 times in total.
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Stinky
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Re: MYGA in Inherited IRA

Post by Stinky »

RubyTuesday wrote: Sat Jun 12, 2021 12:47 pm
Stinky wrote: Sat Jun 12, 2021 12:41 pm I’d definitely reach out to Blueprint Income. I wouldn’t have any idea as to which companies might issue a MYGA into an inherited IRA.

Beyond that, I don’t see any particular issues with what you’re proposing. You’re understanding that you’re locking up the money for 8-9 years at (hopefully) an attractive interest rate, and getting full principal and interest back at the end of the term. The same as any other MYGA.

Please post back and let us know what you hear from Blueprint.
Thanks. Looks like rates are around 2.8-3.2% depending on term, withdrawal restrictions, and financial rating. But the details avail on blueprint don’t mention inherited IRAs so I’ll reach out next week.
There is one possible drawback to the MYGA that I thought of.

Tax rates are already scheduled to revert to prior rates in 2026 I believe. What’s to say that there won’t be another tax increase prior to 2029 or 2030 when your MYGA matures?

With a long duration MYGA, you won’t have the flexibility of withdrawing the money in advance of a tax rise without hitting surrender charges.

Given the relatively small amount involved, you may not be concerned about that. But I wanted to mention it for completeness.
It's a GREAT day to be alive! - Travis Tritt
Topic Author
RubyTuesday
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Joined: Fri Oct 19, 2012 11:24 am

Re: MYGA in Inherited IRA

Post by RubyTuesday »

Alan S. wrote: Sat Jun 12, 2021 1:44 pm
RubyTuesday wrote: Sat Jun 12, 2021 12:19 pm Anyone have any experience buying a MYGA (multi-year guaranteed annuity) in an inherited IRA?

I have an inherited IRA from my parent who passed in 2020. I will need to withdraw all the funds by 12/31/2030. I currently have some of my FI assets in the account. I was thinking of transferring to an insurance company and purchasing a 8 or 9 year MYGA. On maturity I would just withdraw full amount as taxable income (it’s not that large and I will plan accordingly for the taxes).

Anyone have any relevant experience or see any concerns with this approach?

One question is which if any insurers will handle an inherited traditional IRA.

I plan on reaching out to blueprint income and seeing what they have to say.
As far as I know, it has been near impossible to find an insurer who will annuitize an inherited IRA that was not already annuitized by the decedent. One of the reasons may be the complex RMD rules that apply to annuities. The IRS wants to limit any annuity term from extending the deadline to fully distribute an inherited IRA, which is known as the "applicable distribution period".

But perhaps the new 10 year rule will simplify the issue since such inherited IRAs have no annual RMDs and a clear deadline for full distribution not relating to anyone's life expectancy. The insurance company would only need to be concerned with the annuity term ending before the end of the 10 year rule. Such a product would also spread out the taxes over the 10 or 11 tax years and eliminate the tax bomb in the final year if annuitized. MYGAs are not normally annuitized, so the tax bomb would still be a problem for larger premiums.



Let us know if you find any insurers that offer anything in this area.
Thanks I’ll let you all know what I learn.
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
Topic Author
RubyTuesday
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Joined: Fri Oct 19, 2012 11:24 am

Re: MYGA in Inherited IRA

Post by RubyTuesday »

Stinky wrote: Sat Jun 12, 2021 1:49 pm
RubyTuesday wrote: Sat Jun 12, 2021 12:47 pm
Stinky wrote: Sat Jun 12, 2021 12:41 pm I’d definitely reach out to Blueprint Income. I wouldn’t have any idea as to which companies might issue a MYGA into an inherited IRA.

Beyond that, I don’t see any particular issues with what you’re proposing. You’re understanding that you’re locking up the money for 8-9 years at (hopefully) an attractive interest rate, and getting full principal and interest back at the end of the term. The same as any other MYGA.

Please post back and let us know what you hear from Blueprint.
Thanks. Looks like rates are around 2.8-3.2% depending on term, withdrawal restrictions, and financial rating. But the details avail on blueprint don’t mention inherited IRAs so I’ll reach out next week.
There is one possible drawback to the MYGA that I thought of.

Tax rates are already scheduled to revert to prior rates in 2026 I believe. What’s to say that there won’t be another tax increase prior to 2029 or 2030 when your MYGA matures?

With a long duration MYGA, you won’t have the flexibility of withdrawing the money in advance of a tax rise without hitting surrender charges.

Given the relatively small amount involved, you may not be concerned about that. But I wanted to mention it for completeness.
Yes good point. I’m finding that the 5 year rates are as good and maybe better than 8-9 year rates. So if I can find an insurer that will do this, I may go 5 years and then assess tax situation.
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
Topic Author
RubyTuesday
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Joined: Fri Oct 19, 2012 11:24 am

Re: MYGA in Inherited IRA

Post by RubyTuesday »

Here’s what I heard from a blueprint income representative via email…
Availability depends on your state of residence. Our top rates are 3.10% for 6-7 year terms. You can check out the whole list of rates here: https://www.blueprintincome.com/fixed-annuities.

Most insurers we work with will set up an inherited IRA for a MYGA.
The bold emphasis is mine.

I haven’t explored further yet, but if accurate seems like inherited IRA not a big deal.
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
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Stinky
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Re: MYGA in Inherited IRA

Post by Stinky »

RubyTuesday wrote: Mon Jun 14, 2021 5:00 pm Here’s what I heard from a blueprint income representative via email…
Availability depends on your state of residence. Our top rates are 3.10% for 6-7 year terms. You can check out the whole list of rates here: https://www.blueprintincome.com/fixed-annuities.

Most insurers we work with will set up an inherited IRA for a MYGA.
The bold emphasis is mine.

I haven’t explored further yet, but if accurate seems like inherited IRA not a big deal.
That sounds like good news.

Let us know if you have questions as the process goes on.
It's a GREAT day to be alive! - Travis Tritt
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