Seeking advice on annuities

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
breezly
Posts: 30
Joined: Wed Aug 27, 2008 4:46 pm
Location: NW Washington state

Seeking advice on annuities

Post by breezly »

I've recently done some consolidating of my accounts. I've moved most everything except my current workplace 401K and my savings/checking account to Fidelity. I've also converted my old 401K accounts to IRA/Roth IRA accounts. I plan to retire in 18 months.

Here's my situation:
Emergency Funds: Yes - CD's and savings - ~100K
Debt: None
Tax Filing: Married Filing Jointly
Tax Rate: 22% Federal, no state income tax
State: WA
Age: 65, wife is 63
Desired Asset Allocation: Has been 65 stock/ 35 bond, considering shifting to more bonds to reduce risk.
Desired International Allocation: 20%
Portfolio size: 2-3M

Taxable:
3.8% Fidelity Money Mkt (FZDXX)
9.7% Vang Total Stock Mkt Index (VTSAX) (.04)
3.7% 3 yr Annuity started 8/2023, 4.85%, MassMutual
0.4% Cash

His Rollover IRA:
0.9% Fidelity MidCap Index (FSMDX) (.03)
2.0% Fidelity 500 Index (FXAIX) (.02)
5.3% Fidelity US Bond Index (FXNAX) (.03)
9.6% Fidelity Zero Intntl Index (FZILX)(0)
4.5% Fidelity Zero Extended Mkt Index (FZIPX) (0)
0.7% Schwab Int US Treas (SCHR) (.03)
2.5% Vanguard Infl. Prot. Sec. Adm (VAIPX) (.10)
2.1% Vanguard Total Int Bond Index (VTABX) (.11)
14.8% 5 yr Annuity started 1/2024, 4.4%, USAA

His Roth IRA:
10.6% Fidelity Zero Large Cap Index (FNILX) (0)
3.0% Schwab Int US Treas (SCHR) (.03)
3.6% Vanguard REIT Index (VGSLX) (.12)

Her Roth IRA:
2.0% Schwab US TIPS (SCHP)(.03)
0.7% Vanguard Total Bond Index (VBTLX) (.05)
2.9% Vanguard REIT Index (VGSLX) (.12)
0.8% Vanguard Total Int Bond Index (VTABX) (.11)

His Roth 401K:
12.5% SSgA S&P 500 Index (SSSYX) (.01)
3.9% SSgA Russell Sm/Mid Cap Index (SSMKX) (.04)

Contributions:
$8000 His Roth IRA
$8000 Her Roth IRA
$30,500 His Roth 401K
$4,700 - His 401K Company Match


Available funds in His Roth 401K:
SSgA GlblAllCap exUS Index (SSGLX) (.07)
SSgA US Bond Index (SSFEX) (.03)

Since consolidating at Fidelity, I was put in touch with a Fidelity advisor. The most recent advice resulted in the 2 annuities - one in the Taxable account and the other in the IRA Rollover. I was wanting to move a portion of my portfolio to less risky investments, and this is what he recommended.

Questions:
1 - Were these annuities a mistake? If so, what is the best path forward? I'm assuming I should stay until the annuity matures.

2 - What fund consolidations would you recommend going forward?
mhalley
Posts: 10394
Joined: Tue Nov 20, 2007 5:02 am

Re: Seeking advice on annuities

Post by mhalley »

What kind of annuity did you buy? Are they mygas?
viewtopic.php?t=334589&start=1500
User avatar
Stinky
Posts: 13960
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Seeking advice on annuities

Post by Stinky »

breezly wrote: Thu Feb 08, 2024 8:56 pm
3.7% 3 yr Annuity started 8/2023, 4.85%, MassMutual
14.8% 5 yr Annuity started 1/2024, 4.4%, USAA

Since consolidating at Fidelity, I was put in touch with a Fidelity advisor. The most recent advice resulted in the 2 annuities - one in the Taxable account and the other in the IRA Rollover. I was wanting to move a portion of my portfolio to less risky investments, and this is what he recommended.

Questions:
1 - Were these annuities a mistake? If so, what is the best path forward? I'm assuming I should stay until the annuity matures.
So, with a portfolio size of $2-3 million, the approximate size of the annuities are $100k at Mass Mutual, and $350k at USAA. Is that about correct?

And are these annuities multi-year guaranteed annuities (MYGAs)? A MYGA has a fixed interest rate for a fixed number of years. From the details that you posted, it sounds like your annuities have both of these attributes - a fixed rate and a fixed term. Are these annuities MYGAs?

If they are MYGAs, then your best move is very likely to stay with the annuities until the "initial interest rate guarantee period" expires. That will be in 2026 for Mass Mutual, and early 2029 for USAA. If you were to surrender the annuities now, it's likely that you would have a pretty significant surrender charge. From what I can see on the Fidelity MYGA site, your surrender charge would be a flat 7% (that is, about $7,000) until 2026 on the Mass Mutual policy, and 7% for the first three years, then 6%, then 5% (that is, about $20,000 initially) on the USAA policy.

Once again, presuming they are MYGAs, you will be able to withdraw up to 10% of the value each policy year without surrender charge penalty.

I don't think that your purchases were a "mistake". They are just a way of locking in a "fixed income" return on almost 20% of your portfolio. Presuming that's what you intended to do, I think these MYGAs are just fine.

Also, you purchased from two EXTREMELY STRONG life insurance companies. I don't have any concerns with the ability of those two companies to fully perform on the contracts, even though it's likely that the USAA contract exceeded the limits of your state life and annuity guaranty fund.

Post back with your questions.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
Topic Author
breezly
Posts: 30
Joined: Wed Aug 27, 2008 4:46 pm
Location: NW Washington state

Re: Seeking advice on annuities

Post by breezly »

So, with a portfolio size of $2-3 million, the approximate size of the annuities are $100k at Mass Mutual, and $350k at USAA. Is that about correct?
Yes - 100K at Mass Mutual and 400K at USAA.
And are these annuities multi-year guaranteed annuities (MYGAs)?
Yes - I believe these are MYGAs. Your assumptions about timelines and guaranteed rates are correct - 4.85% for Mass Mutual until 2026, and 4.4% for USAA until 2029. I do recall the advisor mentioning the ability to withdraw 10% each year without penalty.
I don't think that your purchases were a "mistake". They are just a way of locking in a "fixed income" return on almost 20% of your portfolio. Presuming that's what you intended to do, I think these MYGAs are just fine.
My goal was to reduce the risk in my portfolio, and locking in a fixed rate for a portion of my portfolio seemed like a reasonable approach. However, I started having 2nd thoughts after these purchases, and much of that is just from ignorance of what I was getting into, as you can probably tell from my questions. If I could do it over again, would this be a recommended approach, or was there a "better" way to achieve my goals?
User avatar
Stinky
Posts: 13960
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Seeking advice on annuities

Post by Stinky »

breezly wrote: Fri Feb 09, 2024 3:12 pm My goal was to reduce the risk in my portfolio, and locking in a fixed rate for a portion of my portfolio seemed like a reasonable approach. However, I started having 2nd thoughts after these purchases, and much of that is just from ignorance of what I was getting into, as you can probably tell from my questions. If I could do it over again, would this be a recommended approach, or was there a "better" way to achieve my goals?
I think that you took a reasonable approach. As you say, locking in a fixed rate with no market value risk if you hold to maturity is definitely a low risk approach.

An improvement could have been to get a little higher rate of interest if you had gone with a slightly lower rated company. Both the companies you chose have the highest ratings from AM Best, A++. If you had gone with a slightly lower rated company of A+ or A, you could have gotten a rate of over 5% on your funds.

As I said, you took a very reasonable, risk averse approach.

Best to you.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
BitTooAggressive
Posts: 1048
Joined: Tue Jul 13, 2021 3:15 pm

Re: Seeking advice on annuities

Post by BitTooAggressive »

Lots of downside to annuities. You have lost the ability to rebalance with this portion of your portfolio into stocks if a large market downturn.
User avatar
Stinky
Posts: 13960
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Seeking advice on annuities

Post by Stinky »

BitTooAggressive wrote: Sat Feb 10, 2024 6:37 am Lots of downside to annuities. You have lost the ability to rebalance with this portion of your portfolio into stocks if a large market downturn.
Note that both of the purchased annuities have 10% of premium “penalty free withdrawals” in the first policy year.

So OP could get $50k in cash out of the annuities now if he/she wanted to rebalance (or anything else), without any penalty.

In subsequent policy years, OP can take out 10% of prior anniversary account value without any penalty.

So there is significant liquidity available to OP if he desires to use it.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
mikejuss
Posts: 2656
Joined: Tue Jun 23, 2020 1:36 pm

Re: Seeking advice on annuities

Post by mikejuss »

Why not just increase your bond holdings in your traditional IRA account, OP?
50% VTSAX | 25% VTIAX | 25% VTEAX (taxable), 25% VBTLX (retirement)
BitTooAggressive
Posts: 1048
Joined: Tue Jul 13, 2021 3:15 pm

Re: Seeking advice on annuities

Post by BitTooAggressive »

Stinky wrote: Sat Feb 10, 2024 9:06 am
BitTooAggressive wrote: Sat Feb 10, 2024 6:37 am Lots of downside to annuities. You have lost the ability to rebalance with this portion of your portfolio into stocks if a large market downturn.
Note that both of the purchased annuities have 10% of premium “penalty free withdrawals” in the first policy year.

So OP could get $50k in cash out of the annuities now if he/she wanted to rebalance (or anything else), without any penalty.

In subsequent policy years, OP can take out 10% of prior anniversary account value without any penalty.

So there is significant liquidity available to OP if he desires to use it.
Yes but they are still restricted. So you have to weigh those against each other.

And wow I get access to 10% of MY money.
User avatar
Stinky
Posts: 13960
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Seeking advice on annuities

Post by Stinky »

BitTooAggressive wrote: Sat Feb 10, 2024 9:20 am
Stinky wrote: Sat Feb 10, 2024 9:06 am
BitTooAggressive wrote: Sat Feb 10, 2024 6:37 am Lots of downside to annuities. You have lost the ability to rebalance with this portion of your portfolio into stocks if a large market downturn.
Note that both of the purchased annuities have 10% of premium “penalty free withdrawals” in the first policy year.

So OP could get $50k in cash out of the annuities now if he/she wanted to rebalance (or anything else), without any penalty.

In subsequent policy years, OP can take out 10% of prior anniversary account value without any penalty.

So there is significant liquidity available to OP if he desires to use it.
Yes but they are still restricted. So you have to weigh those against each other.

And wow I get access to 10% of MY money.
Just pushing back against your (incorrect) assertion that “you have lost the ability to rebalance with this portion of your portfolio”.

Best to you.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
BitTooAggressive
Posts: 1048
Joined: Tue Jul 13, 2021 3:15 pm

Re: Seeking advice on annuities

Post by BitTooAggressive »

Stinky wrote: Sat Feb 10, 2024 9:37 am
BitTooAggressive wrote: Sat Feb 10, 2024 9:20 am
Stinky wrote: Sat Feb 10, 2024 9:06 am
BitTooAggressive wrote: Sat Feb 10, 2024 6:37 am Lots of downside to annuities. You have lost the ability to rebalance with this portion of your portfolio into stocks if a large market downturn.
Note that both of the purchased annuities have 10% of premium “penalty free withdrawals” in the first policy year.

So OP could get $50k in cash out of the annuities now if he/she wanted to rebalance (or anything else), without any penalty.

In subsequent policy years, OP can take out 10% of prior anniversary account value without any penalty.

So there is significant liquidity available to OP if he desires to use it.
Yes but they are still restricted. So you have to weigh those against each other.

And wow I get access to 10% of MY money.
Just pushing back against your (incorrect) assertion that “you have lost the ability to rebalance with this portion of your portfolio”.

Best to you.
You have sure you can use a portion or take whatever penalties there are and get your money but usually the liquidity in bonds outweighs whatever slight yield increase you might get in the annuity. It’s a personal need evaluation but I don’t find annuities compelling for most people. Always exceptions.
Topic Author
breezly
Posts: 30
Joined: Wed Aug 27, 2008 4:46 pm
Location: NW Washington state

Re: Seeking advice on annuities

Post by breezly »

Thank you both Stinky and BitTooAggressive for the informative debate back and forth. Actually, it's just what I was looking for. I'd like to understand the pros and cons of this type of investment, and you've both given me valuable points to consider. So sounds like my annuity choice is a safer choice in terms of guaranteed return but a riskier choice in terms of liquidity. Also, good to know about going with slightly lower rated companies to achieve higher returns - that's something I hadn't considered. With just under 20% of my money in the annuities, I think I can handle any level of rebalancing I would consider doing using the rest of my portfolio. My intent is to leave the money there until the initial interest rate guarantee period expires. But this does add another "complexity" to my portfolio which I am trying to simplify. So from that respect, I'm still not sure it was the right move.
Topic Author
breezly
Posts: 30
Joined: Wed Aug 27, 2008 4:46 pm
Location: NW Washington state

Re: Seeking advice on annuities

Post by breezly »

mikejuss wrote: Sat Feb 10, 2024 9:17 am Why not just increase your bond holdings in your traditional IRA account, OP?
That's exactly the question I'm now asking myself. At this point, I'm now just trying to understand which choice was better - buy annuities or increase bond holdings. Also, I will need to revisit this issue when the initial interest rate guarantee periods expire in 2026 and 2029, so would like to be better prepared for then.
soldmybiz
Posts: 20
Joined: Mon Jan 22, 2024 6:47 pm

Re: Seeking advice on annuities

Post by soldmybiz »

If you plan on holding the paper as a fixed return -- I like the MYGA annuity. Can generally get 1.5% higher than 5 or 7 year bonds compounded tax deferred.

This is clean comparison vs simply a hold of US treasury paper. I moved some bond holds into MYGAs instead of treasuries but this is not money I would have rebalanced or moved -- just a hold 5-7 years. I'll then decide whether I take them out or kick the can down the road with new MYGAs of whatever term/rate at the time.

Rates hit a nice peak Nov/Dec/Jan and are down already on MYGAs but still a 130-150 bps over treasuries of same durations.
User avatar
Stinky
Posts: 13960
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Seeking advice on annuities

Post by Stinky »

breezly wrote: Sat Feb 10, 2024 11:36 am Thank you both Stinky and BitTooAggressive for the informative debate back and forth. Actually, it's just what I was looking for. I'd like to understand the pros and cons of this type of investment, and you've both given me valuable points to consider. So sounds like my annuity choice is a safer choice in terms of guaranteed return but a riskier choice in terms of liquidity. Also, good to know about going with slightly lower rated companies to achieve higher returns - that's something I hadn't considered. With just under 20% of my money in the annuities, I think I can handle any level of rebalancing I would consider doing using the rest of my portfolio. My intent is to leave the money there until the initial interest rate guarantee period expires. But this does add another "complexity" to my portfolio which I am trying to simplify. So from that respect, I'm still not sure it was the right move.
First of all, there’s not a lot of upside in revisiting your decision to buy the MYGAs. Short of surrendering and taking the surrender charge hit, there’s not a lot you can do now.

That being said, you could choose to do little more exploration about MYGAs for future reference. Fidelity has chosen to sell for only a few, very highly rated companies. Here’s a link to their page for current MYGA rates. https://fixedincome.fidelity.com/ftgw/f ... bannuities

My favorite site for gathering MYGA product information is Blueprint Income. They have good educational material, and list well over 100 products for most states. Here’s a link to their MYGA page. https://www.blueprintincome.com/resourc ... -annuities

When the initial guarantee period expires on your current policies, you’ll have about 30 days to decide what you want to do with the funds. You can continue for a new guarantee period, exchange to an annuity at a different insurer, or take the funds out. If you keep the funds within an annuity, there won’t be any taxable income reported at that time.

Post back with any questions.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
Topic Author
breezly
Posts: 30
Joined: Wed Aug 27, 2008 4:46 pm
Location: NW Washington state

Re: Seeking advice on annuities

Post by breezly »

Stinky wrote: Sat Feb 10, 2024 1:59 pm My favorite site for gathering MYGA product information is Blueprint Income. They have good educational material, and list well over 100 products for most states. Here’s a link to their MYGA page. https://www.blueprintincome.com/resourc ... -annuities
Thanks for the links. Just finished going through them - lots of good info on the Blueprint site. I'll keep what I have until the guarantee period ends, and then see what makes sense at that point.

Thanks again for walking me through the details - appreciate it!
z3r0c00l
Posts: 3766
Joined: Fri Jul 06, 2012 11:43 am
Location: NYC

Re: Seeking advice on annuities

Post by z3r0c00l »

Not the worst annuities so not a terrible mistake. Not a move I would have made in your shoes but in a few years you could always be done with them.

This "advisor" is really a broker, they are there to sell you products that benefit them. They sold you annuities because all "advisors" do, because annuities get them a commission and index funds don't. It is a rather unethical business, but so are many forms of insurance, time shares, warrantees, etc. The bigger issue is what this broker is going to try and sell you next? And how much are you paying for their biased advice? So the major mistake is working with them, since you are clearly capable of doing it on your own.
70% Global Stocks / 30% Bonds
Topic Author
breezly
Posts: 30
Joined: Wed Aug 27, 2008 4:46 pm
Location: NW Washington state

Re: Seeking advice on annuities

Post by breezly »

z3r0c00l wrote: Sat Feb 10, 2024 8:35 pm And how much are you paying for their biased advice?
This is the part that's not obvious to me. I understand the fees involved on funds and how to identify those, but not sure how to do the same for an annuity.
User avatar
Stinky
Posts: 13960
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Seeking advice on annuities

Post by Stinky »

breezly wrote: Sun Feb 11, 2024 2:54 pm
z3r0c00l wrote: Sat Feb 10, 2024 8:35 pm And how much are you paying for their biased advice?
This is the part that's not obvious to me. I understand the fees involved on funds and how to identify those, but not sure how to do the same for an annuity.
The commissions to the agent on the annuities you purchased are built into the pricing of your policies.

There are no additional fees to you.

The interest rates you have been quoted will be what you get.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
PerfectName
Posts: 86
Joined: Sat Aug 15, 2020 5:09 pm

Re: Seeking advice on annuities

Post by PerfectName »

I'll mention something just for context. I recently retired, and that led to shifting me from a Fidelity rep on the corporate retirement side, to one on the "retail" side. The first thing the new advisor (who told me he was a fiduciary) wanted me to do was put a third of my total portfolio into an annuity (SPIA). He had a lot of tools and glossy presentations from Fidelity to support that. It's possible it was great advice, but the overly polished sales pitch made me too uncomfortable.
Rex66
Posts: 2872
Joined: Tue Aug 04, 2020 5:13 pm

Re: Seeking advice on annuities

Post by Rex66 »

Yes you shouldn’t worry about that with guaranteed annuities. Now if you are thinking you might get some illustrated non guaranteed return then the commission does influence that even though you have little to no control.
Rex66
Posts: 2872
Joined: Tue Aug 04, 2020 5:13 pm

Re: Seeking advice on annuities

Post by Rex66 »

PerfectName wrote: Sun Feb 11, 2024 3:32 pm I'll mention something just for context. I recently retired, and that led to shifting me from a Fidelity rep on the corporate retirement side, to one on the "retail" side. The first thing the new advisor (who told me he was a fiduciary) wanted me to do was put a third of my total portfolio into an annuity (SPIA). He had a lot of tools and glossy presentations from Fidelity to support that. It's possible it was great advice, but the overly polished sales pitch made me too uncomfortable.
The fiduciary term is meaningless to the sale of insurance products. I know from personal experience. If a fiduciary sells you a poor insurance product then finra will claim they have no jurisdiction over that. If you complain to the insurance commissioner they will say they aren’t bound to fiduciary but suitability rules which are pretty much anything goes. If you complain to whatever organization they belong to they will say the person was working under their insurance hat for that sell. Now that may have been an ok recommendation but it isn’t valuable to ask insurance agents if they are fiduciary.
PerfectName
Posts: 86
Joined: Sat Aug 15, 2020 5:09 pm

Re: Seeking advice on annuities

Post by PerfectName »

Rex66 wrote: Sun Feb 11, 2024 3:37 pm The fiduciary term is meaningless to the sale of insurance products. I know from personal experience. If a fiduciary sells you a poor insurance product then finra will claim they have no jurisdiction over that. If you complain to the insurance commissioner they will say they aren’t bound to fiduciary but suitability rules which are pretty much anything goes. If you complain to whatever organization they belong to they will say the person was working under their insurance hat for that sell. Now that may have been an ok recommendation but it isn’t valuable to ask insurance agents if they are fiduciary.
Interesting. It hadn't occurred to me that the Fidelity financial advisor was "insurance rep", at least temporarily while talking to me about annuities, and then (perhaps) a fiduciary when talking to me about SMAs
z3r0c00l
Posts: 3766
Joined: Fri Jul 06, 2012 11:43 am
Location: NYC

Re: Seeking advice on annuities

Post by z3r0c00l »

Stinky wrote: Sun Feb 11, 2024 3:08 pm
breezly wrote: Sun Feb 11, 2024 2:54 pm
z3r0c00l wrote: Sat Feb 10, 2024 8:35 pm And how much are you paying for their biased advice?
This is the part that's not obvious to me. I understand the fees involved on funds and how to identify those, but not sure how to do the same for an annuity.
The commissions to the agent on the annuities you purchased are built into the pricing of your policies.

There are no additional fees to you.

The interest rates you have been quoted will be what you get.
We sure there is no advisory fee at Fidelity?
70% Global Stocks / 30% Bonds
User avatar
Stinky
Posts: 13960
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Seeking advice on annuities

Post by Stinky »

z3r0c00l wrote: Sun Feb 11, 2024 4:55 pm
Stinky wrote: Sun Feb 11, 2024 3:08 pm
breezly wrote: Sun Feb 11, 2024 2:54 pm
z3r0c00l wrote: Sat Feb 10, 2024 8:35 pm And how much are you paying for their biased advice?
This is the part that's not obvious to me. I understand the fees involved on funds and how to identify those, but not sure how to do the same for an annuity.
The commissions to the agent on the annuities you purchased are built into the pricing of your policies.

There are no additional fees to you.

The interest rates you have been quoted will be what you get.
We sure there is no advisory fee at Fidelity?
I wouldn’t have any idea about advisory fees at Fidelity. OP will need to figure that one out.

All I know is that there are no fees hidden within a MYGA. And i know that if OP bought his MYGAs from one of the agencies mentioned in the MYGA mega thread (Blueprint Income, Annuity Advantage, Stan the Annuity Man, etc), there would be no advisory fee.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
Topic Author
breezly
Posts: 30
Joined: Wed Aug 27, 2008 4:46 pm
Location: NW Washington state

Re: Seeking advice on annuities

Post by breezly »

z3r0c00l wrote: Sun Feb 11, 2024 4:55 pm We sure there is no advisory fee at Fidelity?
I'm on the "no-charge" plan at Fidelity. They tried hard to sell me their fee-based model where they manage everything, but I was not interested in that.
Johm221122
Posts: 6342
Joined: Fri May 13, 2011 6:27 pm

Re: Seeking advice on annuities

Post by Johm221122 »

breezly wrote: Sun Feb 11, 2024 2:54 pm
z3r0c00l wrote: Sat Feb 10, 2024 8:35 pm And how much are you paying for their biased advice?
This is the part that's not obvious to me. I understand the fees involved on funds and how to identify those, but not sure how to do the same for an annuity.
The first thing to remember when the word annuity comes up is which kind.
Annuity is a broad category like mutual funds. A mutual fund could be active, passive,bonds, stocks, balanced etc... You have to focus on the type of annuity to get an idea of its specific characteristics.
lakpr
Posts: 11301
Joined: Fri Mar 18, 2011 9:59 am

Re: Seeking advice on annuities

Post by lakpr »

breezly wrote: Sat Feb 10, 2024 11:46 am
mikejuss wrote: Sat Feb 10, 2024 9:17 am Why not just increase your bond holdings in your traditional IRA account, OP?
That's exactly the question I'm now asking myself. At this point, I'm now just trying to understand which choice was better - buy annuities or increase bond holdings. Also, I will need to revisit this issue when the initial interest rate guarantee periods expire in 2026 and 2029, so would like to be better prepared for then.
Remember 2022. If you rebalance into bonds in your IRA, your principal in that bond fund is also at risk, and can go down 13% (intermediate term bond funds) and 20% (long term bond funds), at the same time as stock funds go down.

It's a myth and mirage sold on this forum and elsewhere that the bond funds are for 'safety'. If you intend a portion of your portfolio to be "safe", be there when you need it, then it should be exactly be invested in instruments like CDs, Treasury ladders, MYGAs, and dare I say it, Money market funds, etc.

To the person who sarcastically said "wow, I get access to 10% of MY money" -- yeah, the alternative is to lose 13% of MY money and lose it forever, or at least wait 7 years for it to be returned to me. My personal take on that? No thanks!

To @breezly: You may want to consider withdrawing 10% of the money that's invested in Mass-Mutual and USAA annuities, and reinvest that into MYGAs of the lower-rated insurance companies. I saw on the "blueprintincome" site mentioned by @Stinky, A rated companies (not very much lower in terms of safety) offering a full percentage point higher: 5.35% for maturities ranging 5-10 years. Eke out a bit more yield out of your money.
Post Reply