Double MYGA?

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leftcoaster
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Joined: Mon Jul 23, 2007 4:04 pm

Double MYGA?

Post by leftcoaster »

I need to purchase fixed income investments in my taxable account to maintain my asset allocation. Tax deferred and savings bonds are all full and I already have some state tax free intermediate bond fund shares.

I recently purchased a multi year guaranteed annuity for my spouse, who will be over 59 1/2 when it matures.

I am thinking about purchasing another one for me, but I will not be that old when it matures. I do have the option of avoiding the penalty associated with taking the money before I turn that age. To do so, I would need to roll the money over using a 1035 exchange.

The problem with this approach is that there is no way of knowing what the return will be when it is time to do that exchange. Will there be other fixed Income investments with a more attractive return?

I would be investing 4% of my total portfolio. We already have 4% in the product under my wife’s name.

What do folks here recommend? Would you buy this asset knowing that you have to buy it again in five years or pay a substantial penalty and without knowing what the return will be in five years time?
ThisTimeItsDifferent
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Re: Double MYGA?

Post by ThisTimeItsDifferent »

In my mind, the "substantial penalty" for withdrawal before age 59.5 is not so bad. It is only 10% of the gain, far less than the likely 7- 10% surrender penalty on the --total investment or balance-- if taken before the MYGA term ends. If you get a 3 or 4 year MYGA returning 2% for example, it still returns ~1.8% after the 10% IRS penalty, and that gain was tax deferred also. That's better than a CD of the same term.
Super Hans
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Location: Washington, D.C.

Re: Double MYGA?

Post by Super Hans »

ThisTimeItsDifferent wrote: Fri Oct 23, 2020 8:11 pm In my mind, the "substantial penalty" for withdrawal before age 59.5 is not so bad. It is only 10% of the gain, far less than the likely 7- 10% surrender penalty on the --total investment or balance-- if taken before the MYGA term ends. If you get a 3 or 4 year MYGA returning 2% for example, it still returns ~1.8% after the 10% IRS penalty, and that gain was tax deferred also. That's better than a CD of the same term.
+1. I recently bought a 5-year Americo MYGA at 3,20%. If the MYGA market remains competitive in five years, I'll do a 1035 exchange. If not, I'll pay Uncle Sam 10% of the interest and still be way ahead of the current CD alternatives (unless Americo fails).
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Stinky
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Re: Double MYGA?

Post by Stinky »

ThisTimeItsDifferent wrote: Fri Oct 23, 2020 8:11 pm In my mind, the "substantial penalty" for withdrawal before age 59.5 is not so bad. It is only 10% of the gain, far less than the likely 7- 10% surrender penalty on the --total investment or balance-- if taken before the MYGA term ends. If you get a 3 or 4 year MYGA returning 2% for example, it still returns ~1.8% after the 10% IRS penalty, and that gain was tax deferred also. That's better than a CD of the same term.
I agree with this. The “substantial penalty”, if it comes to it, is just not all that large.

However, I expect that you’ll be able to reinvest into a new term after the end of your MYGA, either with your current company or through a 1035 exchange, at an attractive rate. MYGAs have been around for 20 years or more, and I expect that they’ll be around for a good while longer. Blueprintincome.com shows a broad marketplace, with a lot of companies competing for your business, and I don’t see that changing in the foreseeable future.

I’ve recently bought a MYGA ladder in lieu of bonds or CDs, and I fully expect to be able to “roll” the MYGAs as they mature.
It's a GREAT day to be alive - Travis Tritt
student5
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Re: Double MYGA?

Post by student5 »

Whilst discussing MYGAs, I looked at the Gainbridge website that sells B++ Guggenheim MYGAs only. The MYGA rate is about 0.4% superior to other annuity websites at 3 years. This is attractive to me, but the fAQs indicate that you need to give Gainbridge access to your bank account to pull funds for your MYGA. You cannot write a check or wire funds to Guggenheim. Just an FYI.
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Stinky
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Re: Double MYGA?

Post by Stinky »

student5 wrote: Sat Oct 24, 2020 9:10 am Whilst discussing MYGAs, I looked at the Gainbridge website that sells B++ Guggenheim MYGAs only. The MYGA rate is about 0.4% superior to other annuity websites at 3 years. This is attractive to me, but the fAQs indicate that you need to give Gainbridge access to your bank account to pull funds for your MYGA. You cannot write a check or wire funds to Guggenheim. Just an FYI.
From what I see, it looks like Guggenheim doesn’t currently allow qualified MYGAs either.

I don’t know what their plans are for qualified business.
It's a GREAT day to be alive - Travis Tritt
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