Fido Deferred Fixed Annuity

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aruba joe
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Fido Deferred Fixed Annuity

Post by aruba joe » Mon May 04, 2020 12:45 pm

I know we hate Annuities, but Fido offers Jumbo(100K) deferred fixed annuities from Mass Mutual and NY Life, 3 year term at 2.1%. I'm retired, 73, and would be in my IRA I have with them. I have excess cash with them and won't need the $ for at least 3 years. I already have CD's( some w/credit Unions I learned about on this site) and high quality bonds that go out 2 1/2 years. I'm concerned about buying bond funds at this point with interest rates so low. Would appreciate any thoughts on this.

DarkHelmetII
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Re: Fido Deferred Fixed Annuity

Post by DarkHelmetII » Mon May 04, 2020 1:18 pm

aruba joe wrote:
Mon May 04, 2020 12:45 pm
I know we hate Annuities, but Fido offers Jumbo(100K) deferred fixed annuities from Mass Mutual and NY Life, 3 year term at 2.1%. I'm retired, 73, and would be in my IRA I have with them. I have excess cash with them and won't need the $ for at least 3 years. I already have CD's( some w/credit Unions I learned about on this site) and high quality bonds that go out 2 1/2 years. I'm concerned about buying bond funds at this point with interest rates so low. Would appreciate any thoughts on this.
Permanent Portfolio? 25% equities 25% long-term treasuries 25% cash 25% gold.

I realize this is a totally different than a yes / no on the deferred fixed annuity option but it seems as though you want some modest growth but don't want to expose yourself to a single risk (e.g. interest rates in the case of bonds). Thought I'd throw this out there for your consideration.

mhalley
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Re: Fido Deferred Fixed Annuity

Post by mhalley » Mon May 04, 2020 1:19 pm

We don’t hate all annuities. Deferred and immediate fixed annuities are felt to be ok. The decision to buy an annuity is very complicated. I know Taylor bought some and was very pleased. I don’t think buying annuities just because bond rates are low is a valid reason. Your withdrawal rate should be the defining factor. At 73, 4% should be perfectly fine.
You might check out otars book where he goes into detail on when to buy them.
http://retirementoptimizer.com/

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aruba joe
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Re: Fido Deferred Fixed Annuity

Post by aruba joe » Mon May 04, 2020 2:33 pm

AA is 12% cash, 42% bonds and CD's, 46% US index funds( FXAIX and FSKAX: S&P and US total mkt). So I have quite a lot in equity that I won't need for about 10 years( until we are 83). Not too worried about beyond that. I guess you could say I won the game but still don't want to do anything stupid.

jimkinny
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Re: Fido Deferred Fixed Annuity

Post by jimkinny » Mon May 04, 2020 2:54 pm

I am not sure what you are implying by writing you have excess cash that you won't need for at least 3 years. An annuity is an insurance product that requires you giving money to an insurance company. A single premium annuity means you give the money as one lump sum payment. A deferred annuity is one that starts paying out when the "deferred" time period is up be it 1 year, 2 year...10 year etc.... Once the payment is made you own the product.

What is it you are trying to accomplish and please explain to me what Fido has for sale.

Do you think you can get your payment back in 3 years? Can you? I may be wrong and maybe Fido has some special product but I don't think you can get your money back in three years, if that is what your are implying that you won't need the money for at least 3 years.

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aruba joe
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Re: Fido Deferred Fixed Annuity

Post by aruba joe » Mon May 04, 2020 5:07 pm

So the cash I have will cover 3 years of expenses. When I add the bonds and CD's the total w/ cash (safe money)will last me 10 years. the FIDO product is a guaranteed fixed 2.1% for 3 years unless the insurance company goes under. After 3 years I cash it in . So it's like a CD but w/ a higher interest rate. I'm trying to get the best return on "safe money". The decision I need to make is whether to buy the annuity or put the money in in a bond fund.

retired@50
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Re: Fido Deferred Fixed Annuity

Post by retired@50 » Mon May 04, 2020 5:17 pm

aruba joe wrote:
Mon May 04, 2020 5:07 pm
So the cash I have will cover 3 years of expenses. When I add the bonds and CD's the total w/ cash (safe money)will last me 10 years. the FIDO product is a guaranteed fixed 2.1% for 3 years unless the insurance company goes under. After 3 years I cash it in . So it's like a CD but w/ a higher interest rate. I'm trying to get the best return on "safe money". The decision I need to make is whether to buy the annuity or put the money in in a bond fund.
This sounds fishy...??? An annuity that lasts only 3 years? Why don't they call it a CD then? I'd be careful here.

See link. https://www.investopedia.com/terms/f/fixedannuity.asp

Regards,
This is one person's opinion. Nothing more.

gjlynch17
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Re: Fido Deferred Fixed Annuity

Post by gjlynch17 » Mon May 04, 2020 5:20 pm

I believe the OP is asking about Multi-Year Guaranteed Annuity (MYGA), which are also referred to as Deferred Fixed Annuities. Fidelity has a good discussion and links to MYGA rates below.

https://www.fidelity.com/annuities/defe ... s/overview

I am far from an expert on MYGAs but am (hopefully) a few years away from early retirement and plan to build a fixed income ladder consisting of some combination of Treasuries, CDs, MYGAs and investment grade bulletshares ETFs (from iShares or Invesco). As the OP indicated, the comparison is the 2.1% 3-year rate offered by MassMutual and New York Life compared to CDs. The state annuity "guarantees" are not as good as FDIC insurance but MassMutual and New York Life are highly rated insurance companies and I would have no concerns about a 3-year MYGA with either company. As such, I would not hesitate to invest in a 3-year 2.1% MYGA from either company rather than a CD. The MYGA has the additional benefit of deferring the interest until the MYGA becomes due.

Other outstanding MYGA resources to compare rates from a broader range of companies than Fidelity offers are Blueprint Income and Stan the Annuity Man, both linked below:

https://www.blueprintincome.com/fixed-annuities

http://www.stantheannuityman.com/annuit ... ties-myga/

Stan the Annuity Man also provides a link to the Comdex rankings which provide information on health of insurance companies.

http://www.stantheannuityman.com/annuit ... -rankings/

Bottom line is that MYGAs like the OP suggested are one of the few annuity products that are worth investing in (Single Payment Immediate Annuities and Deferred Income Annuities being the other two). The specific ones identified by the OP are appropriate comparisons to CDs.

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Re: Fido Deferred Fixed Annuity

Post by retired@50 » Mon May 04, 2020 5:46 pm

gjlynch17 wrote:
Mon May 04, 2020 5:20 pm
I believe the OP is asking about Multi-Year Guaranteed Annuity (MYGA), which are also referred to as Deferred Fixed Annuities. Fidelity has a good discussion and links to MYGA rates below.
...
Bottom line is that MYGAs like the OP suggested are one of the few annuity products that are worth investing in (Single Payment Immediate Annuities and Deferred Income Annuities being the other two). The specific ones identified by the OP are appropriate comparisons to CDs.
Does this mean you can get your money back in 3 years?

No surrender charges, etc.

Regards,
This is one person's opinion. Nothing more.

gjlynch17
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Re: Fido Deferred Fixed Annuity

Post by gjlynch17 » Mon May 04, 2020 6:16 pm

retired@50 wrote:
Mon May 04, 2020 5:46 pm
gjlynch17 wrote:
Mon May 04, 2020 5:20 pm
I believe the OP is asking about Multi-Year Guaranteed Annuity (MYGA), which are also referred to as Deferred Fixed Annuities. Fidelity has a good discussion and links to MYGA rates below.
...
Bottom line is that MYGAs like the OP suggested are one of the few annuity products that are worth investing in (Single Payment Immediate Annuities and Deferred Income Annuities being the other two). The specific ones identified by the OP are appropriate comparisons to CDs.
Does this mean you can get your money back in 3 years?

No surrender charges, etc.

Regards,
Yes. It is like a CD in that you get your money back at the end of the term. I believe you may be able to roll it over to another annuity also. Like a CD, there are penalties for early withdrawal. Also, there is no FDIC insurance so the credit rating of the insurer is important.

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Re: Fido Deferred Fixed Annuity

Post by Stinky » Mon May 04, 2020 9:52 pm

gjlynch17 wrote:
Mon May 04, 2020 5:20 pm
I believe the OP is asking about Multi-Year Guaranteed Annuity (MYGA), which are also referred to as Deferred Fixed Annuities. Fidelity has a good discussion and links to MYGA rates below.

https://www.fidelity.com/annuities/defe ... s/overview

I am far from an expert on MYGAs but am (hopefully) a few years away from early retirement and plan to build a fixed income ladder consisting of some combination of Treasuries, CDs, MYGAs and investment grade bulletshares ETFs (from iShares or Invesco). As the OP indicated, the comparison is the 2.1% 3-year rate offered by MassMutual and New York Life compared to CDs. The state annuity "guarantees" are not as good as FDIC insurance but MassMutual and New York Life are highly rated insurance companies and I would have no concerns about a 3-year MYGA with either company. As such, I would not hesitate to invest in a 3-year 2.1% MYGA from either company rather than a CD. The MYGA has the additional benefit of deferring the interest until the MYGA becomes due.

Other outstanding MYGA resources to compare rates from a broader range of companies than Fidelity offers are Blueprint Income and Stan the Annuity Man, both linked below:

https://www.blueprintincome.com/fixed-annuities

http://www.stantheannuityman.com/annuit ... ties-myga/

Stan the Annuity Man also provides a link to the Comdex rankings which provide information on health of insurance companies.

http://www.stantheannuityman.com/annuit ... -rankings/

Bottom line is that MYGAs like the OP suggested are one of the few annuity products that are worth investing in (Single Payment Immediate Annuities and Deferred Income Annuities being the other two). The specific ones identified by the OP are appropriate comparisons to CDs.
+1

Excellent analysis. MYGAs are “good” annuity products. Guaranteed rate for the three year term, with availability of rollover into a new term. Taxes are deferred until funds are withdrawn.

The negatives are surrender charges if money is needed before three years, and no FDIC insurance. But NY Life and Mass Mutual are two of the very strongest insurance companies.
It's a GREAT day to be alive - Travis Tritt

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aruba joe
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Re: Fido Deferred Fixed Annuity

Post by aruba joe » Tue May 05, 2020 1:29 pm

Thanks all.

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Stinky
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Re: Fido Deferred Fixed Annuity

Post by Stinky » Tue May 05, 2020 1:47 pm

aruba joe wrote:
Tue May 05, 2020 1:29 pm
Thanks all.
Let us know if you decide to buy.
It's a GREAT day to be alive - Travis Tritt

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aruba joe
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Re: Fido Deferred Fixed Annuity

Post by aruba joe » Wed May 06, 2020 9:58 am

Decided to buy the Jumbo from Mass Mutual.

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Stinky
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Re: Fido Deferred Fixed Annuity

Post by Stinky » Wed May 06, 2020 10:06 am

aruba joe wrote:
Wed May 06, 2020 9:58 am
Decided to buy the Jumbo from Mass Mutual.
Good decision.

I think that you’ll be glad you made the purchase.

Best of luck to you.
It's a GREAT day to be alive - Travis Tritt

FoolStreet
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Re: Fido Deferred Fixed Annuity

Post by FoolStreet » Wed May 06, 2020 10:44 am

aruba joe wrote:
Mon May 04, 2020 12:45 pm
I know we hate Annuities, but Fido offers Jumbo(100K) deferred fixed annuities from Mass Mutual and NY Life, 3 year term at 2.1%. I'm retired, 73, and would be in my IRA I have with them. I have excess cash with them and won't need the $ for at least 3 years. I already have CD's( some w/credit Unions I learned about on this site) and high quality bonds that go out 2 1/2 years. I'm concerned about buying bond funds at this point with interest rates so low. Would appreciate any thoughts on this.
It sounds like you want a 3 year Product that pays 2.1% inside your IRA. That’s it?

FoolStreet
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Re: Fido Deferred Fixed Annuity

Post by FoolStreet » Wed May 06, 2020 10:55 am

FoolStreet wrote:
Wed May 06, 2020 10:44 am
aruba joe wrote:
Mon May 04, 2020 12:45 pm
I know we hate Annuities, but Fido offers Jumbo(100K) deferred fixed annuities from Mass Mutual and NY Life, 3 year term at 2.1%. I'm retired, 73, and would be in my IRA I have with them. I have excess cash with them and won't need the $ for at least 3 years. I already have CD's( some w/credit Unions I learned about on this site) and high quality bonds that go out 2 1/2 years. I'm concerned about buying bond funds at this point with interest rates so low. Would appreciate any thoughts on this.
It sounds like you want a 3 year Product that pays 2.1% inside your IRA. That’s it?
I understand you bought it and I’m sure it’s fine based on more knowledgeable bogleheads posting above. For discussion purposes, Vanguard has short and ultra short bond funds paying 2.2 and 2.0%. Since they are short, interest risk is limited. I personally am scared of annuities because hey make them complicated and I feel like I never know when they will try to sneak in a clause to lock the the money in, whether to me or to parents.

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Re: Fido Deferred Fixed Annuity

Post by PatrickA5 » Wed May 06, 2020 12:41 pm

Are there any fees in buying these, or are they included in the rate you're getting? I noticed most of them have a 7% surrender fee per year. So, if I wanted to cash the whole thing in the first year, would I owe 7% surrender fee or 21% (3 x 7%). Any other gotchas?

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Re: Fido Deferred Fixed Annuity

Post by Stinky » Wed May 06, 2020 7:00 pm

PatrickA5 wrote:
Wed May 06, 2020 12:41 pm
Are there any fees in buying these, or are they included in the rate you're getting? I noticed most of them have a 7% surrender fee per year. So, if I wanted to cash the whole thing in the first year, would I owe 7% surrender fee or 21% (3 x 7%). Any other gotchas?
OP would need to tell us what the surrender charge is.

On a three year MYGA, I can’t imagine it’s as high as 7%. Probably more like 3/2/1 for the three contract years. But OP would know.
It's a GREAT day to be alive - Travis Tritt

petulant
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Re: Fido Deferred Fixed Annuity

Post by petulant » Wed May 06, 2020 7:08 pm

Thank you for telling us about this product! I will definitely be looking at this as an alternative to CDs and short-term bond funds in the future.

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aruba joe
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Re: Fido Deferred Fixed Annuity

Post by aruba joe » Thu May 07, 2020 5:00 am

There are no other fees except the surrender fee of 7% for years 1,2 and 3. (You can withdraw 10%/year without any penalties.) So I would not have bought this if I had the slightest doubt about needing the $ for three years.

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Re: Fido Deferred Fixed Annuity

Post by Stinky » Thu May 07, 2020 5:13 am

aruba joe wrote:
Thu May 07, 2020 5:00 am
There are no other fees except the surrender fee of 7% for years 1,2 and 3. (You can withdraw 10%/year without any penalties.) So I would not have bought this if I had the slightest doubt about needing the $ for three years.
Thanks for the update.

So the largest negative on this product is the surrender fees if you need the money before the term expires.

I assume that surrender charges are waived on death, so at least that shouldn’t be an issue.
It's a GREAT day to be alive - Travis Tritt

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aruba joe
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Re: Fido Deferred Fixed Annuity

Post by aruba joe » Thu May 07, 2020 6:19 am

Both statements are correct. Additionally, the Mass Mutual annuity has Terminal illness and nursing home waivers.

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Re: Fido Deferred Fixed Annuity

Post by PatrickA5 » Thu May 07, 2020 9:31 am

So, if you withdraw in year one, will you owe 7% or 21% as a surrender charge?

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aruba joe
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Re: Fido Deferred Fixed Annuity

Post by aruba joe » Thu May 07, 2020 9:43 am

It's 7%.

PatrickA5
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Re: Fido Deferred Fixed Annuity

Post by PatrickA5 » Thu May 07, 2020 10:00 am

Thanks. I've been reading up on them. Might make some sense as an alternative to brokered CDs in my IRA. As someone above stated, need to decide if this is better than just buying a shorter term bond fund.

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Re: Fido Deferred Fixed Annuity

Post by PatrickA5 » Sat May 09, 2020 10:13 am

aruba joe wrote:
Wed May 06, 2020 9:58 am
Decided to buy the Jumbo from Mass Mutual.
Question: Did you buy this within your Fidelity IRA? If yes, is it still considered a part of your Fidelity IRA, or was the money rolled over to Mass Mutual and you now have a Mass Mutual IRA with the MYGA as an investment?

Not sure it matters, but I'm trying to keep things simple and don't want different accounts all over the place. Thanks!

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Re: Fido Deferred Fixed Annuity

Post by capjak » Sat May 09, 2020 10:57 am

gjlynch17 wrote:
Mon May 04, 2020 5:20 pm
I believe the OP is asking about Multi-Year Guaranteed Annuity (MYGA), which are also referred to as Deferred Fixed Annuities. Fidelity has a good discussion and links to MYGA rates below.

https://www.fidelity.com/annuities/defe ... s/overview

I am far from an expert on MYGAs but am (hopefully) a few years away from early retirement and plan to build a fixed income ladder consisting of some combination of Treasuries, CDs, MYGAs and investment grade bulletshares ETFs (from iShares or Invesco). As the OP indicated, the comparison is the 2.1% 3-year rate offered by MassMutual and New York Life compared to CDs. The state annuity "guarantees" are not as good as FDIC insurance but MassMutual and New York Life are highly rated insurance companies and I would have no concerns about a 3-year MYGA with either company. As such, I would not hesitate to invest in a 3-year 2.1% MYGA from either company rather than a CD. The MYGA has the additional benefit of deferring the interest until the MYGA becomes due.

Other outstanding MYGA resources to compare rates from a broader range of companies than Fidelity offers are Blueprint Income and Stan the Annuity Man, both linked below:

https://www.blueprintincome.com/fixed-annuities

http://www.stantheannuityman.com/annuit ... ties-myga/

Stan the Annuity Man also provides a link to the Comdex rankings which provide information on health of insurance companies.

http://www.stantheannuityman.com/annuit ... -rankings/

Bottom line is that MYGAs like the OP suggested are one of the few annuity products that are worth investing in (Single Payment Immediate Annuities and Deferred Income Annuities being the other two). The specific ones identified by the OP are appropriate comparisons to CDs.
Fidelity is usually not competitive with immediate annuities or stan the annuity man. Both will have AMBEST rated A or better or if you prefer comdex ratings than 80 or better is a good place to start. The rates for a 3 year MYGA A rated or higher is currently 2.25%. However there are A+ 7 year MYGAs at 3.5% with free withdrawals of yearly interest.

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aruba joe
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Re: Fido Deferred Fixed Annuity

Post by aruba joe » Sat May 09, 2020 4:07 pm

Patrick
The annuity now appears in my Fidelity account as a fixed annuity with Mass Mutual. It has a separate IRA # within my Fido account along with my previous IRA and Roth. So I monitor it within my Fido account. When it matures in 3 years I can roll it back to my Fido IRA with one phone call. Maybe I could have gotten better deals outside if this(I don't think so) but this keeps it more simple for me.

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Re: Fido Deferred Fixed Annuity

Post by PatrickA5 » Sat May 09, 2020 5:19 pm

aruba joe wrote:
Sat May 09, 2020 4:07 pm
Patrick
The annuity now appears in my Fidelity account as a fixed annuity with Mass Mutual. It has a separate IRA # within my Fido account along with my previous IRA and Roth. So I monitor it within my Fido account. When it matures in 3 years I can roll it back to my Fido IRA with one phone call. Maybe I could have gotten better deals outside if this(I don't think so) but this keeps it more simple for me.
Thanks for the information.

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Re: Fido Deferred Fixed Annuity

Post by capjak » Mon May 11, 2020 6:10 pm

Great, I am doing the same thing but going to ladder AMBest A+ rated, 3 year (2.25%), 5 year (2.65%) and 7 year (3.5%) MYGAs not in fidelity however.

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Re: Fido Deferred Fixed Annuity

Post by Stinky » Tue May 12, 2020 4:33 am

capjak wrote:
Mon May 11, 2020 6:10 pm
Great, I am doing the same thing but going to ladder AMBest A+ rated, 3 year (2.25%), 5 year (2.65%) and 7 year (3.5%) MYGAs not in fidelity however.
Just for my edification - what is the surrender charge schedule on the 7 year MYGA?

Hopefully it’s not a flat 7%. Probably something more like 7/6/5/4/3/2, stepping down each year.
It's a GREAT day to be alive - Travis Tritt

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Re: Fido Deferred Fixed Annuity

Post by gjlynch17 » Tue May 12, 2020 5:30 am

capjak wrote:
Mon May 11, 2020 6:10 pm
Great, I am doing the same thing but going to ladder AMBest A+ rated, 3 year (2.25%), 5 year (2.65%) and 7 year (3.5%) MYGAs not in fidelity however.
Yes, there are some good MYGA opportunities currently, especially for taxable accounts due to the tax deferral. I am a couple of years from building my fixed income ladder and have been tracking Treasuries, CDs, maturity date bond ETFs and MYGAs. There was a brief period in March during the ETF dislocation between NAV and price when maturity date bond ETFs were attractive but currently MYGAs are the best option for fixed income ladders. Treasuries are currently historically unattractive for bond ladders.

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Re: Fido Deferred Fixed Annuity

Post by PatrickA5 » Tue May 12, 2020 3:10 pm

Called FIDO today and of course the rate is down to 2% for Mass Mutual 3yr Jumbo. I asked the guy if he could order one up on the phone and lock in that rate before it goes any lower and he said I'd have to go through my local guy. Ugh. So, I set up an appointment phone call for Thursday. I guess the local guy must get the commission or something. We'll see how it goes. His next available appointment isn't until early June, so we'd better get it all done Thursday. He'll probably try to talk me into some variable indexed annuity or something. Won't happen.

From what I understand, this is considered an direct IRA rollover from Fidelity to Mass Mutual. It still shows up on Fidelity's website, but the money is actually at Mass Mutual. Make sense.

Watching Ally (and others) rates plummet the last couple of days, it won't surprise me if the 2% is gone by Thursday.

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Re: Fido Deferred Fixed Annuity

Post by capjak » Tue May 12, 2020 6:17 pm

Stinky wrote:
Tue May 12, 2020 4:33 am
capjak wrote:
Mon May 11, 2020 6:10 pm
Great, I am doing the same thing but going to ladder AMBest A+ rated, 3 year (2.25%), 5 year (2.65%) and 7 year (3.5%) MYGAs not in fidelity however.
Just for my edification - what is the surrender charge schedule on the 7 year MYGA?

Hopefully it’s not a flat 7%. Probably something more like 7/6/5/4/3/2, stepping down each year.
If you think will need access to more than the cumulative interest or some of the other allow 10% than these are not good products for you.
9.30%, 8.40%, 7.50%, 6.60%, 5.70%, 4.75%, 3.80%, can withdrawal cumulative interest earned after the first contract year without Surrender Charge or MVA.

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Re: Fido Deferred Fixed Annuity

Post by capjak » Tue May 12, 2020 6:25 pm

PatrickA5 wrote:
Tue May 12, 2020 3:10 pm
Called FIDO today and of course the rate is down to 2% for Mass Mutual 3yr Jumbo. I asked the guy if he could order one up on the phone and lock in that rate before it goes any lower and he said I'd have to go through my local guy. Ugh. So, I set up an appointment phone call for Thursday. I guess the local guy must get the commission or something. We'll see how it goes. His next available appointment isn't until early June, so we'd better get it all done Thursday. He'll probably try to talk me into some variable indexed annuity or something. Won't happen.

From what I understand, this is considered an direct IRA rollover from Fidelity to Mass Mutual. It still shows up on Fidelity's website, but the money is actually at Mass Mutual. Make sense.

Watching Ally (and others) rates plummet the last couple of days, it won't surprise me if the 2% is gone by Thursday.
Yes Mass Mutual A++ rated by AMBEST is at 2.0 % but A+ rated is 2.25%, A- rated is at 2.75%.
You should check out stan the annuity man or immediate annuity or blueprint income. MYGAs are commodities there is no difference from one retail seller to the other.

A.M. Best:

A++ and A+ (Superior) Assigned to companies which have, on balance, superior balance sheet strength, operating performance and business profile when compared to the standards established by the A.M. Best Company. These companies, in our opinion, have a very strong ability to meet their ongoing obligations to policyholders.
A and A- (Excellent) Assigned to companies which have, on balance, excellent balance sheet strength, operating performance and business profile when compared to the standards established by the A.M. Best Company. These companies, in our opinion, have a strong ability to meet their ongoing obligations to policyholders.
B++ and B+ (Very Good) Assigned to companies which have, on balance, very good balance sheet strength, operating performance and business profile when compared to the standards established by the A.M. Best Company. These companies, in our opinion, have a good ability to meet their ongoing obligations to policyholders.

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Re: Fido Deferred Fixed Annuity

Post by Stinky » Wed May 13, 2020 10:55 am

capjak wrote:
Tue May 12, 2020 6:25 pm
PatrickA5 wrote:
Tue May 12, 2020 3:10 pm
Called FIDO today and of course the rate is down to 2% for Mass Mutual 3yr Jumbo. I asked the guy if he could order one up on the phone and lock in that rate before it goes any lower and he said I'd have to go through my local guy. Ugh. So, I set up an appointment phone call for Thursday. I guess the local guy must get the commission or something. We'll see how it goes. His next available appointment isn't until early June, so we'd better get it all done Thursday. He'll probably try to talk me into some variable indexed annuity or something. Won't happen.

From what I understand, this is considered an direct IRA rollover from Fidelity to Mass Mutual. It still shows up on Fidelity's website, but the money is actually at Mass Mutual. Make sense.

Watching Ally (and others) rates plummet the last couple of days, it won't surprise me if the 2% is gone by Thursday.
Yes Mass Mutual A++ rated by AMBEST is at 2.0 % but A+ rated is 2.25%, A- rated is at 2.75%.
You should check out stan the annuity man or immediate annuity or blueprint income. MYGAs are commodities there is no difference from one retail seller to the other.

A.M. Best:

A++ and A+ (Superior) Assigned to companies which have, on balance, superior balance sheet strength, operating performance and business profile when compared to the standards established by the A.M. Best Company. These companies, in our opinion, have a very strong ability to meet their ongoing obligations to policyholders.
A and A- (Excellent) Assigned to companies which have, on balance, excellent balance sheet strength, operating performance and business profile when compared to the standards established by the A.M. Best Company. These companies, in our opinion, have a strong ability to meet their ongoing obligations to policyholders.
B++ and B+ (Very Good) Assigned to companies which have, on balance, very good balance sheet strength, operating performance and business profile when compared to the standards established by the A.M. Best Company. These companies, in our opinion, have a good ability to meet their ongoing obligations to policyholders.
I would be just fine with a A+ rated annuity company. That's an easy way to pick up 0.25% of yield.

Personally, I'd find a company rated A- by AM Best to be pretty sketchy. I wouldn't give them money for a 7 year period.

I absolutely wouldn't buy an annuity from any company rated lower than A-.
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KeepItSimpleSomehow
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Re: Fido Deferred Fixed Annuity

Post by KeepItSimpleSomehow » Sat May 16, 2020 3:35 pm

As for pinning hopes on ratings importance ... Is an insurance company rating "real"? Doesn't the insurance company pay for the rating (conflict of interest)? Weren't these ratings providers exposed in 2008 crash as being part of the problem? Also lagging in changing their ratings lower when was common knowledge to all long before?

Seems for short term MYGAs 3-5 years term, a rating B++ / B+ and higher is a reasonable cut off vs only A ratings. If a better return on a B++ company vs the A something company, I take the highest return on short term.

The return will be different state to state on the same MYGA. (A 3.5% in one state may be 3.1% in another for the same insurance company product; as well as some insurance company MYGAs are not sold in all states). The state's guaranty is the real coverage along with diversification...spread MYGA funds among multiple insurance companies.

As for those with concerns about early withdrawal penalties, like CDs, I do not put all my funds into one. Example instead of $100k into one MYGA or CD, hold it in $20K increments; five individual MYGAs or CDs. Then if only need $20k withdrawal, penalty less than on full $100k.

I think when SPIA / DIA purchase time, I will cut off in the A's. Give the company room to slip into Bs ratings over time. One of my current MYGA insurance companies ratings increased to A- last year from B++.

Just my thoughts ... :wink:

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indexfundfan
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Re: Fido Deferred Fixed Annuity

Post by indexfundfan » Sat May 16, 2020 4:06 pm

I'm new to this. Question - is it a simple process to reinvest the money when the MYGA matures? Is each renewal considered a 1035 exchange? I'm currently at the age where any earnings withdrawal would be subject to the 10% tax penalty. Thanks for sharing.
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Stinky
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Re: Fido Deferred Fixed Annuity

Post by Stinky » Sat May 16, 2020 5:23 pm

indexfundfan wrote:
Sat May 16, 2020 4:06 pm
I'm new to this. Question - is it a simple process to reinvest the money when the MYGA matures? Is each renewal considered a 1035 exchange? I'm currently at the age where any earnings withdrawal would be subject to the 10% tax penalty. Thanks for sharing.
I believe that most MYGAs automatically renew for a new term, at the then-current rate, if the owner does not take action to withdraw funds. It will have a new surrender charge schedule if the owner re-ups the contract. There is a window of 30-60 days during which the policyholder can withdraw funds without a surrender charge.

I believe that the policyholder can elect to change the guarantee period when he renews; that is, he can buy a 5 year MYGA, and then move into a 2 year bucket once the initial 5 years is finished.

There is no 1035 event (and no tax reporting) unless the policyholder moves to a new company.

Please don’t take my word for this - check out your contract.
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Re: Fido Deferred Fixed Annuity

Post by Stinky » Sat May 16, 2020 5:30 pm

KeepItSimpleSomehow wrote:
Sat May 16, 2020 3:35 pm
As for pinning hopes on ratings importance ... Is an insurance company rating "real"? Doesn't the insurance company pay for the rating (conflict of interest)? Weren't these ratings providers exposed in 2008 crash as being part of the problem? Also lagging in changing their ratings lower when was common knowledge to all long before?

Seems for short term MYGAs 3-5 years term, a rating B++ / B+ and higher is a reasonable cut off vs only A ratings. If a better return on a B++ company vs the A something company, I take the highest return on short term.
On ratings, I can assure you that the ratings are “real”. I dealt with the rating agencies as a part of my job with my former insurance company employer. In my experience, the “business” and the “analytical” sides of the rating agencies were entirely separate. There is no amount of money paid to a rating agency that could have gotten a higher rating for my employer.

On buying from a lower rated company, I personally would not buy an annuity from a company rated anywhere in the B category from AM Best. I’ve seen the financials for those companies, and some of them are pretty sketchy. Yes, the guaranty funds will protect you, but I wouldn’t want to go through an insurance company insolvency as a policyholder.
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Cpadave
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Re: Fido Deferred Fixed Annuity

Post by Cpadave » Fri May 22, 2020 9:03 am

I bought 3 years mass mutual for 2%. I was told these are guaranteed by my state insurance reserve for upto 300k. If that is the case, why not buy lower rating insurance company that pays a higher rate like 2.5% for up to 300k?

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Re: Fido Deferred Fixed Annuity

Post by Stinky » Fri May 22, 2020 9:10 am

Cpadave wrote:
Fri May 22, 2020 9:03 am
I bought 3 years mass mutual for 2%. I was told these are guaranteed by my state insurance reserve for upto 300k. If that is the case, why not buy lower rating insurance company that pays a higher rate like 2.5% for up to 300k?
You certainly could buy from a lower rated company.

As I said above, I personally wouldn’t go into the “B” category with AM Best. But that’s just my opinion.
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Re: Fido Deferred Fixed Annuity

Post by retired@50 » Fri May 22, 2020 9:22 am

Stinky wrote:
Fri May 22, 2020 9:10 am
Cpadave wrote:
Fri May 22, 2020 9:03 am
I bought 3 years mass mutual for 2%. I was told these are guaranteed by my state insurance reserve for upto 300k. If that is the case, why not buy lower rating insurance company that pays a higher rate like 2.5% for up to 300k?
You certainly could buy from a lower rated company.

As I said above, I personally wouldn’t go into the “B” category with AM Best. But that’s just my opinion.
No kidding. Do you really want to wind up in court trying to get your $300k back from a bankrupt insurance company? Not fun.

Regards,
This is one person's opinion. Nothing more.

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Re: Fido Deferred Fixed Annuity

Post by Stinky » Fri May 22, 2020 9:38 am

retired@50 wrote:
Fri May 22, 2020 9:22 am
Stinky wrote:
Fri May 22, 2020 9:10 am
Cpadave wrote:
Fri May 22, 2020 9:03 am
I bought 3 years mass mutual for 2%. I was told these are guaranteed by my state insurance reserve for upto 300k. If that is the case, why not buy lower rating insurance company that pays a higher rate like 2.5% for up to 300k?
You certainly could buy from a lower rated company.

As I said above, I personally wouldn’t go into the “B” category with AM Best. But that’s just my opinion.
No kidding. Do you really want to wind up in court trying to get your $300k back from a bankrupt insurance company? Not fun.

Regards,
Actually, you wouldn’t wind up in court yourself.

In all of the life insurance insolvencies I’ve seen, the policyholder would get a letter from the company soon after the insurer becomes insolvent. The letter would say something like “Your insurer is insolvent. It’s under the control of the guaranty fund. Please continue to remit premiums and submit requests for policy service to (this address - usually the address of the insolvent company).”

The guaranty fund may operate the company for a while, providing financial support as needed. However, the guaranty fund will usually try to find a solvent company to which the policy can be transferred. When the transfer happens, the policyholder will be informed.

While the policyholder might feel some self-imposed stress while the insurer is in receivership, he should not be required to go to court to exercise his rights.
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Cpadave
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Re: Fido Deferred Fixed Annuity

Post by Cpadave » Fri May 22, 2020 9:53 am

Interesting, good to know how it works. I am good with my 2% from massmutual for now.

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