Purchasing MYGAs (multi year guaranteed annuities) - mega thread

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discman017
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by discman017 »

I searched this thread, but couldn't find the answer to this question.

I'm looking at the Oceanview 6-year MYGA at 4.3%. I would be buying it with traditional IRA money. I see that it allows for 10% annual withdrawals without surrender charges.

Is it possible to take a 10% withdrawal as a partial IRA rollover, into a traditional IRA elsewhere? Or at least to get a check that I can then deposit back into my IRA within 60 days?

I'm looking for a way to take these withdrawals without penalties. My intent would be to hold to maturity, but six years is a long time. The 10% annual withdrawal allowance would be a nice hedge in case interest rates rise.
webtrojan
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by webtrojan »

HueyLD wrote: Wed May 25, 2022 1:34 pm
webtrojan wrote: Wed May 25, 2022 1:21 pm
indexfundfan wrote: Wed May 25, 2022 11:40 am Does anyone know if Canvas Annuity now lets you set the contingent beneficiary on the online application?

I just bought some Canvas Annuities. You cannot designate Contingent Beneficiaries on the Application, but you can easily submit a change of beneficiary form and add the contingents thru their portal online. Just go to "Policy Service" and "Manage Beneficiaries". You can digitally sign the document.
Take a closer look at the form. Your signature must be witnessed by another human being. It is a pain.
I believe you only have to have a witness if you're married and your spouse is not your primary beneficiary. If they are the primary and you're just adding contingents, there isn't a witness needed. I will send an email to them and double check, but that's how I read it and submitted it.
Chardo
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Chardo »

I wouldn't be too concerned about a contingent beneficiary on a short term annuity contract. The contingent bene only comes into play if the primary bene is already dead when the annuitant dies. You can just change the bene if that happens.
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Stinky
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

discman017 wrote: Wed May 25, 2022 2:31 pm I searched this thread, but couldn't find the answer to this question.

I'm looking at the Oceanview 6-year MYGA at 4.3%. I would be buying it with traditional IRA money. I see that it allows for 10% annual withdrawals without surrender charges.

Is it possible to take a 10% withdrawal as a partial IRA rollover, into a traditional IRA elsewhere? Or at least to get a check that I can then deposit back into my IRA within 60 days?

I'm looking for a way to take these withdrawals without penalties. My intent would be to hold to maturity, but six years is a long time. The 10% annual withdrawal allowance would be a nice hedge in case interest rates rise.
Yes, you can take withdrawals from a IRA MYGA and redeposit into another IRA. I have gone through that process within the last two months.

I will share my Oceanview experience with you, which was less than fully satisfactory. I requested a 10% withdrawal from an Oceanview traditional IRA MYGA about a month ago. I interfaced through Blueprint Income rather than contacting Oceanview directly (which may have been a mistake). My intention was to have a direct transfer from Oceanview to my Vanguard traditional IRA, and I filled out the requisite Oceanview paperwork.

Imagine my surprise when I received a check in the mail from Oceanview a few days later, followed up by a letter from Oceanview saying that they couldn’t do a direct transfer on the first withdrawal from a MYGA. They said they could only do a direct transfer on the second withdrawal. Seems like a weird policy to me!

It turned out to not be a problem for me, because I had already planned to do some Roth conversions this year. So I just cashed the check, had Vanguard pull from my checking account into my Roth account with them, and will pay the conversion taxes out of other available cash.

So, my primary recommendation to you is to get in touch with Oceanview directly to tell them what you want to do and work out the details. And I do think using the 10% annual free partial withdrawal is a great product feature.
Former life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
webtrojan
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by webtrojan »

Chardo wrote: Wed May 25, 2022 2:51 pm I wouldn't be too concerned about a contingent beneficiary on a short term annuity contract. The contingent bene only comes into play if the primary bene is already dead when the annuitant dies. You can just change the bene if that happens.
Canvas verified the witness isn't needed except if the spouse is not the primary beneficiary.
My primary is my spouse. My concern would be if something happened to us together when traveling, so I always designate my contingent. Just like I would on a CD.
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HueyLD
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by HueyLD »

webtrojan wrote: Wed May 25, 2022 2:43 pm
HueyLD wrote: Wed May 25, 2022 1:34 pm
webtrojan wrote: Wed May 25, 2022 1:21 pm
indexfundfan wrote: Wed May 25, 2022 11:40 am Does anyone know if Canvas Annuity now lets you set the contingent beneficiary on the online application?

I just bought some Canvas Annuities. You cannot designate Contingent Beneficiaries on the Application, but you can easily submit a change of beneficiary form and add the contingents thru their portal online. Just go to "Policy Service" and "Manage Beneficiaries". You can digitally sign the document.
Take a closer look at the form. Your signature must be witnessed by another human being. It is a pain.
I believe you only have to have a witness if you're married and your spouse is not your primary beneficiary. If they are the primary and you're just adding contingents, there isn't a witness needed. I will send an email to them and double check, but that's how I read it and submitted it.
Your comment prompted me to take a look at their Beneficiary Change Form and the form has been vastly redesigned and now divided into sections A, B, C and D. Such section division did not exist a year ago and the requirement for a witness signature line appeared on the bottom of the form indicating that owner signature and spouse signature if applicable both required signature of a witness.

I guess it is an improvement, but could be better if they allow for contingent beneficiary designation directly on the application form.
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indexfundfan
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by indexfundfan »

webtrojan wrote: Wed May 25, 2022 2:57 pm Canvas verified the witness isn't needed except if the spouse is not the primary beneficiary.
My primary is my spouse. My concern would be if something happened to us together when traveling, so I always designate my contingent. Just like I would on a CD.
Thanks for the feedback. So you are saying that since your spouse is the beneficiary, you actually were able to add a contingent beneficiary online, signed digitally without the need to print out and physical mail in the form?

If so, that is an improvement. The last time I had to print and mail it in. They also wanted a witness signature. I pushed back on this requirement (early COVID days) and they said a copy of the picture ID will suffice.

Still, all this would have been avoided if they had added the ability to specify the contingent beneficiary during the application process (like other MYGA applications).
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webtrojan
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by webtrojan »

indexfundfan wrote: Wed May 25, 2022 3:21 pm
webtrojan wrote: Wed May 25, 2022 2:57 pm Canvas verified the witness isn't needed except if the spouse is not the primary beneficiary.
My primary is my spouse. My concern would be if something happened to us together when traveling, so I always designate my contingent. Just like I would on a CD.
Thanks for the feedback. So you are saying that since your spouse is the beneficiary, you actually were able to add a contingent beneficiary online, signed digitally without the need to print out and physical mail in the form?

If so, that is an improvement. The last time I had to print and mail it in. They also wanted a witness signature. I pushed back on this requirement (early COVID days) and they said a copy of the picture ID will suffice.

Still, all this would have been avoided if they had added the ability to specify the contingent beneficiary during the application process (like other MYGA applications).
Yes, I agree. I also bought two 3-year annuities from them last year and had to do the mail in form with witnesses. It was a pain. So I was happily surprised when I was able to do it all online this time for the 3 additional contracts I just did this week. Wish you could do it on the application itself (if your spouse is the primary) without all the extra steps, but at least it's an improvement.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by indexfundfan »

webtrojan wrote: Wed May 25, 2022 5:01 pm Yes, I agree. I also bought two 3-year annuities from them last year and had to do the mail in form with witnesses. It was a pain. So I was happily surprised when I was able to do it all online this time for the 3 additional contracts I just did this week. Wish you could do it on the application itself (if your spouse is the primary) without all the extra steps, but at least it's an improvement.
Thanks. When you say sign digitally, how is that done? Do they send you a DocuSign form? Or do you print, sign, scan and email the form back to them?
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antiqueman
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by antiqueman »

For those of you buying MYGA's from A-,BBB+++ are you not concerned about defaults?

The 4.0 percent and 4.3 percent is nice but I would be worried one of those insurance companies might default. I have heard the quote "More money has been lost reaching for yield...," many times.

I own MYGA's but they A+ AA+ carriers.

It is not worth it to me to take the risk on the difference between a BBB+ company and an A+ company. Usually there is about .75 basis pt difference between them. On a 100k MYGA you only receive $750.00 a year more for buying the BBB+ MYGA. About $ 62.00 a month.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

antiqueman wrote: Wed May 25, 2022 7:24 pm For those of you buying MYGA's from A-,BBB+++ are you not concerned about defaults?

The 4.0 percent and 4.3 percent is nice but I would be worried one of those insurance companies might default. I have heard the quote "More money has been lost reaching for yield...," many times.

I own MYGA's but they A+ AA+ carriers.

It is not worth it to me to take the risk on the difference between a BBB+ company and an A+ company. Usually there is about .75 basis pt difference between them. On a 100k MYGA you only receive $750.00 a year more for buying the BBB+ MYGA. About $ 62.00 a month.
Two things have made me feel comfortable in purchasing MYGAs from A- and B++ companies:

—- The coverage of state guaranty funds. While they do not have either the strength of the FDIC or the general taxing authority of the state, they do have assessment ability against all other life insurance companies licensed in the state. That’s a powerful authority that enables the guaranty associations to collect the funds to cover a defaulted insurers shortfall.

—- The relatively short term nature of the MYGA liability. While I would not purchase a lifetime SPIA, which might payout over 30-40 years, from a company rated B++, I would feel comfortable with a five year MYGA from that company.

But I can’t (and won’t) criticize your decision to purchase only from companies rated A+ and A++. You’re right that it’s a trade off of a lower rated company for a higher credited rate, and there’s no single way of answering where’s the right place to land.

Best to you.
Former life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Chardo »

I always found it curious how a person concerned enough to check a company's rating would give their money to a low-rated one.

That said, I agree with Stinky that there is minimal risk of default in the short time frame involved, and safety nets in place to mitigate that risk.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by webtrojan »

indexfundfan wrote: Wed May 25, 2022 5:36 pm
webtrojan wrote: Wed May 25, 2022 5:01 pm Yes, I agree. I also bought two 3-year annuities from them last year and had to do the mail in form with witnesses. It was a pain. So I was happily surprised when I was able to do it all online this time for the 3 additional contracts I just did this week. Wish you could do it on the application itself (if your spouse is the primary) without all the extra steps, but at least it's an improvement.
Thanks. When you say sign digitally, how is that done? Do they send you a DocuSign form? Or do you print, sign, scan and email the form back to them?
Yes, it’s all online via DocuSign. Actually very easy. No printing, scanning or emailing involved.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by SpaceCowboy »

Ending Monday the 4.3% 6 year rate from Oceanview. Application has to be signed off Monday 6/6 by both applicant and agent to lock the rate. You have 60 days to fund it after that. I applied this weekend using Blueprint.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by PaulieLilly »

I have a question regarding Early Surrender/Withdrawal Charges.
Given the rising rate environment we're in, I'm toying with the thought of chasing some yield (I've got too much time on my hands).
I pasted in some info on one of my MYGA's below (with Canvas/Puritan).
I'm over age 60 and this MYGA is funded with IRA money.

First I thought I'd pull my free 10%, push it back to my Fidelity IRA and look at some Treasuries etc.
Then I started thinking if the penalty is not too much I may withdraw >10% ... herein lies my question.

I read some postings which stated the penalty% is applied against the interest earned to date on the excess withdrawal amount (a minor hit).
But reading thru the Puritan info below, I interpret it as the penalty% is multiplied by the excess Total Accumulation amount (a MAJOR hit).
Maybe this is just something specific to Puritan policies?
I plan to contact Puritan next week for clarification.
I'm curious as to other interpretations and/or experience regarding early MYGA withdrawals ???

Image

SURRENDERS
Before, or at, the Maturity Date, You may make a full or partial surrender of the Cash Surrender Value of this contract. Any surrender amount in excess of the Free Partial Surrender Amount is subject to a Surrender Charge unless waived as described below.

SURRENDER CHARGE SCHEDULE
The surrender charge schedule is shown on the Contract Schedule. Surrender charges are a percentage of the Accumulation Value surrendered. The surrender charge percentage varies by the contract year in which the surrender occurs.

FREE PARTIAL SURRENDERS
Partial surrenders of the Accumulation Value may be taken each contract year up to the Free Partial Surrender Amount without a surrender charge. The Free Partial Surrender Amount stated on the contract schedule is equal to the Free Partial Surrender Percentage times the Accumulation Value at the time of the partial surrender,
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Chardo »

PaulieLilly wrote: Sat Jun 18, 2022 12:23 pm I have a question regarding Early Surrender/Withdrawal Charges.
Given the rising rate environment we're in, I'm toying with the thought of chasing some yield (I've got too much time on my hands).
I pasted in some info on one of my MYGA's below (with Canvas/Puritan).
I'm over age 60 and this MYGA is funded with IRA money.

First I thought I'd pull my free 10%, push it back to my Fidelity IRA and look at some Treasuries etc.
Then I started thinking if the penalty is not too much I may withdraw >10% ... herein lies my question.

I read some postings which stated the penalty% is applied against the interest earned to date on the excess withdrawal amount (a minor hit).
But reading thru the Puritan info below, I interpret it as the penalty% is multiplied by the excess Total Accumulation amount (a MAJOR hit).
Maybe this is just something specific to Puritan policies?
I plan to contact Puritan next week for clarification.
I'm curious as to other interpretations and/or experience regarding early MYGA withdrawals ???

Image

SURRENDERS
Before, or at, the Maturity Date, You may make a full or partial surrender of the Cash Surrender Value of this contract. Any surrender amount in excess of the Free Partial Surrender Amount is subject to a Surrender Charge unless waived as described below.

SURRENDER CHARGE SCHEDULE
The surrender charge schedule is shown on the Contract Schedule. Surrender charges are a percentage of the Accumulation Value surrendered. The surrender charge percentage varies by the contract year in which the surrender occurs.

FREE PARTIAL SURRENDERS
Partial surrenders of the Accumulation Value may be taken each contract year up to the Free Partial Surrender Amount without a surrender charge. The Free Partial Surrender Amount stated on the contract schedule is equal to the Free Partial Surrender Percentage times the Accumulation Value at the time of the partial surrender,
The entire amount above the 10% free withdrawal is charged at 7, 8, or 9% depending on year. Some also apply a market value adjustment, which if rates are rising means a further reduction. It's a major hit.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

PaulieLilly wrote: Sat Jun 18, 2022 12:23 pm I have a question regarding Early Surrender/Withdrawal Charges.
Given the rising rate environment we're in, I'm toying with the thought of chasing some yield (I've got too much time on my hands).
I pasted in some info on one of my MYGA's below (with Canvas/Puritan).
I'm over age 60 and this MYGA is funded with IRA money.

First I thought I'd pull my free 10%, push it back to my Fidelity IRA and look at some Treasuries etc.
Then I started thinking if the penalty is not too much I may withdraw >10% ... herein lies my question.

I read some postings which stated the penalty% is applied against the interest earned to date on the excess withdrawal amount (a minor hit).
But reading thru the Puritan info below, I interpret it as the penalty% is multiplied by the excess Total Accumulation amount (a MAJOR hit).
Maybe this is just something specific to Puritan policies?
I plan to contact Puritan next week for clarification.
I'm curious as to other interpretations and/or experience regarding early MYGA withdrawals ???

Image

SURRENDERS
Before, or at, the Maturity Date, You may make a full or partial surrender of the Cash Surrender Value of this contract. Any surrender amount in excess of the Free Partial Surrender Amount is subject to a Surrender Charge unless waived as described below.

SURRENDER CHARGE SCHEDULE
The surrender charge schedule is shown on the Contract Schedule. Surrender charges are a percentage of the Accumulation Value surrendered. The surrender charge percentage varies by the contract year in which the surrender occurs.

FREE PARTIAL SURRENDERS
Partial surrenders of the Accumulation Value may be taken each contract year up to the Free Partial Surrender Amount without a surrender charge. The Free Partial Surrender Amount stated on the contract schedule is equal to the Free Partial Surrender Percentage times the Accumulation Value at the time of the partial surrender,
I believe that the Puritan/Canvas annuity has typical surrender charge language. If you withdraw beyond the 10% free partial withdrawal, you’ll be assessed a surrender charge per the scale your quoted on the excess amount.

In the event of such an excess withdrawal, you might also be subject to a market value adjustment. This is similar to the change in market value if you had bought a three year bond rather than a three year MYGA. The MVA for most policies can be either positive or negative.

If you want to pursue an excess withdrawal, I suggest that you get in touch with the company to find out the surrender charge and MVA.

The “10% of interest earned” penalty is something entirely different. That’s the additional tax that is due when a person who is under age 59.5 makes a withdrawal from a taxable annuity. Since you’re in an IRA (and are over age 59.5), that doesn’t apply to you.

Post back with questions.
Former life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by indexfundfan »

My understanding is that if the withdrawal is subject to MVA, then this adjustment would negate any benefit of "interest rate market timing", since if interest rates have increased, you will be"prepaying" the penalty in the form of the MVA to get out of the MYGA.

But interestingly, I did not find any mention of MVA in the Canvas MYGA literature. But it is possible that I missed it.
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Stinky
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

indexfundfan wrote: Sat Jun 18, 2022 1:15 pm My understanding is that if the withdrawal is subject to MVA, then this adjustment would negate any benefit of "interest rate market timing", since if interest rates have increased, you will be"prepaying" the penalty in the form of the MVA to get out of the MYGA.

But interestingly, I did not find any mention of MVA in the Canvas MYGA literature. But it is possible that I missed it.
I agree with you about the intent of the MVA provision.

I also agree that the Puritan contract doesn’t seem to have an MVA. I have a Puritan policy, and don’t see an MVA in the contract. I believe that most MYGAs have MVAs, but Puritan looks like the exception.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by PaulieLilly »

Thx for the clarification / confirmation ... I will NOT exceed the 10% free withdrawal amount!
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Post by HueyLD »

One option I don’t like about Puritan MYGAs is that the insurance company reserves the right to defer paying a surrender for up to six months from the date they receive your request.

Not sure if that provision is specific to my state.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

PaulieLilly wrote: Sat Jun 18, 2022 1:27 pm Thx for the clarification / confirmation ... I will NOT exceed the 10% free withdrawal amount!
I think that’s a wise decision.

I’ve posted many times that a MYGA should be purchased only if it’s overwhelmingly likely that the purchaser can hold it to maturity. The early surrender charges on your product would wipe out all of the interest you’ve earned, and then some.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by indexfundfan »

PaulieLilly wrote: Sat Jun 18, 2022 1:27 pm Thx for the clarification / confirmation ... I will NOT exceed the 10% free withdrawal amount!
I did some quick calculation based on the information you posted.

Assume you withdraw 10%, i.e. $20,713.

If you had continued with the policy for another 21-mo, this would have earned $997, giving a total of $21710.
If you withdraw this money and put into a 21-mo treasury or CD, you may be able to get around 3.1%. This would have earned $1124, giving a total of $21837.

So the difference is around $127.

The difference is not much because this is a 3-yr MYGA and you are 15-mo into it with only around 21-mo remaining. If it were a 5-yr MYGA, the difference would be greater, which I had calculated for my own scenario.

PS. I used simple interest calculation to make the calculations easy. While the final value is not exact, the difference of $127 should be quite close.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by PaulieLilly »

indexfundfan ... thx for crunching the numbers. I certainly won't withdraw 10% to make a killing!

My motivation includes:
  • Ideally/Eventually I'd like to re-consolidate my current MYGA investments back into my Fidelity IRA under one umbrella. This initial little chunk would give me a head-start before my current 3 MYGA's mature.
  • My reinvestment plans will likely be shorter term (6-24mo) pushing me toward Treasuries, CD's, etc.
  • A small chunk gives me a sandbox to get started with Treasuries which are new for me.
  • Then there is, What if rates continue to increase? Alternatives to my current 2.75% may become more favorable.
  • Better liquidity access to rebalance to my asset allocation if stocks continue to fall.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by SpaceCowboy »

I do think it’s worthwhile exploring one’s MYGA portfolio for the penalty free withdrawal options. Can combine them from multiple MYGAs, e.g. from a ladder, to purchase a new higher rate one.
Question - if you use the penalty free withdrawal to purchase a new MYGA in whole or in part, can it be done as a tax-free exchange or rollover if it’s in a taxable not IRA account?
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Post by HueyLD »

SpaceCowboy wrote: Sat Jun 18, 2022 5:32 pm Question - if you use the penalty free withdrawal to purchase a new MYGA in whole or in part, can it be done as a tax-free exchange or rollover if it’s in a taxable not IRA account?
What you described is called a 1035 exchange for nonqualified funds.

Your insurance company may only allow a 1035 exchange for the entire balance. You should call or email the insurance company directly.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

HueyLD wrote: Sat Jun 18, 2022 6:56 pm
SpaceCowboy wrote: Sat Jun 18, 2022 5:32 pm Question - if you use the penalty free withdrawal to purchase a new MYGA in whole or in part, can it be done as a tax-free exchange or rollover if it’s in a taxable not IRA account?
What you described is called a 1035 exchange for nonqualified funds.

Your insurance company may only allow a 1035 exchange for the entire balance. You should call or email the insurance company directly.
I agree.

Also, realize that the MYGAs you be buying using funds from a free partial withdrawal would likely be pretty small. For example, if you have a $250k MYGA, a 10% free partial withdrawal is only $25k. You won’t get the highest rates at many companies with a deposit that small.
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Post by BarbK »

Stinky or other MYGA experts:

1. Is there a place to find the ratings of all MYGA companies? ETA - I found this: https://www.immediateannuities.com/insu ... y-ratings/

2. On the 1035 exchange, have you ever had any issues with the basis on a non-qualified rolling over correctly? I have a non-qualified (fully mature) annuity. One year I took out a small partial withdrawal (all taxable), then a few years later I withdrew $75K of which appox 27K was taxable by my calculations and when I got my 1099 that year, they put the entire withdrawal as taxable. I called them and they ended up correcting the 1099. This was an initial purchase but doing multiple 1035 exchanges basis may be harder to trace.

Not sure if I should just do a 1035 exchange or withdraw the $ as most of what is left is principle and start as a new (clean) MYGA

Insurance company is Symetra.

3. Looking at BluePrint Annuity - What do you think of 5 year Reliance Standard A++ @ 4.05% ? or any good 3-5 year alternatives?

Thank you for your advice.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

BarbK wrote: Sat Jun 18, 2022 8:26 pm Stinky or other MYGA experts:

1. Is there a place to find the ratings of all MYGA companies? ETA - I found this: https://www.immediateannuities.com/insu ... y-ratings/

2. On the 1035 exchange, have you ever had any issues with the basis on a non-qualified rolling over correctly? I have a non-qualified (fully mature) annuity. One year I took out a small partial withdrawal (all taxable), then a few years later I withdrew $75K of which appox 27K was taxable by my calculations and when I got my 1099 that year, they put the entire withdrawal as taxable. I called them and they ended up correcting the 1099. This was an initial purchase but doing multiple 1035 exchanges basis may be harder to trace.

Not sure if I should just do a 1035 exchange or withdraw the $ as most of what is left is principle and start as a new (clean) MYGA

Insurance company is Symetra.

3. Looking at BluePrint Annuity - What do you think of 5 year Reliance Standard A++ @ 4.05% ? or any good 3-5 year alternatives?

Thank you for your advice.
A.M. Best has historically been primarily a rating agency almost solely dedicated to dealing with insurance companies. It rates basically all insurance companies, and gives consumers access to actual ratings and recent press releases at its website, ambest.com. You'll need to sign up for a free account. If you want deeper analysis of a particular company, you'll need to purchase a report on that company.

The main rating agencies (S&P, Moody's, Fitch) also rate insurance companies, on different scales than Best uses. Not all life insurers are rated by the main agencies, in part because of the cost and intrusiveness of the main agencies relative to Best. Many smaller insurers, and the majority of those rated lower (like B++ and below by Best) have only the Best rating. Many life insurers that have other ratings publish them on their websites, but there is no requirement to do so, and it may take some time to find each of the ratings that you want. I do not know of a single "free" source to get other ratings besides Best.

Concerning your problems with Symetra and cost basis, I can't say whether there is a likelihood that the company will screw up the taxable income reporting the next time you make a withdrawal. Maybe Symetra fixed whatever underlying problem they had when they corrected your prior withdrawal, but maybe there is an underlying problem that will recur. I'd guess that there is a higher than average chance that they will mess up again, but that's pure conjecture on my part.

Concerning Reliance Standard and their current rate on the five year contract, I would regard 4.05% as a very solid interest rate. Per AM Best, Reliance Standard's ultimate parent is Tokio Marine, the largest non-life insurer in Japan, who provides significant support to RS, and that gives RS the highest rating from Best. My only less-than-positive comment is that the relative attractiveness of MYGAs relative to other alternatives like Treasuries has waned as MYGA rates have moved less than other interest rates. For example, as of Friday 6/17/22, the five year Treasury was at about 3.35%, a much narrower spread to MYGAs than was the case when this thread was started.
Former life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by BarbK »

Stinky - Thank you for the information and your insights. I really appreciate it.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Chardo »

Something to keep in mind, Symetra is one of the few companies with some MYGA contracts that have 7 year surrender charge regardless of initial rate guarantee. Check your contract.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by BarbK »

Chardo wrote: Sun Jun 19, 2022 6:23 am Something to keep in mind, Symetra is one of the few companies with some MYGA contracts that have 7 year surrender charge regardless of initial rate guarantee. Check your contract.

That's not a problem; it was a 7 year and has been matured (I know 'matured' is not the right term) for a few years now. Aside from them screwing up the 1099, their withdrawal process is really easy and fast. I think I will call them to confirm the taxable $ before withdrawal.

Thank you
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by tj »

BarbK wrote: Sat Jun 18, 2022 8:26 pm Stinky or other MYGA experts:

1. Is there a place to find the ratings of all MYGA companies? ETA - I found this: https://www.immediateannuities.com/insu ... y-ratings/

2. On the 1035 exchange, have you ever had any issues with the basis on a non-qualified rolling over correctly? I have a non-qualified (fully mature) annuity. One year I took out a small partial withdrawal (all taxable), then a few years later I withdrew $75K of which appox 27K was taxable by my calculations and when I got my 1099 that year, they put the entire withdrawal as taxable. I called them and they ended up correcting the 1099. This was an initial purchase but doing multiple 1035 exchanges basis may be harder to trace.

Not sure if I should just do a 1035 exchange or withdraw the $ as most of what is left is principle and start as a new (clean) MYGA

Insurance company is Symetra.

3. Looking at BluePrint Annuity - What do you think of 5 year Reliance Standard A++ @ 4.05% ? or any good 3-5 year alternatives?

Thank you for your advice.
The stantheannuityman website posts a PDF of comdex ratings, that's probably the best resource you'll find.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by GibsonL6s »

Just a reminder to check your states guaranty associations for what they cover. I have been hesitant to buy an annuity after finding out California only guaranties 80% of the present value, most states are 100%. With Treasuries being state tax free, the only minor benefit to a a fixed annuity is deferral.

Here is a page with the links for those who would like to look coverage up.

https://www.immediateannuities.com/stat ... ociations/
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by HueyLD »

GibsonL6s wrote: Sun Jun 19, 2022 10:30 am Just a reminder to check your states guaranty associations for what they cover. I have been hesitant to buy an annuity after finding out California only guaranties 80% of the present value, most states are 100%. With Treasuries being state tax free, the only minor benefit to a a fixed annuity is deferral.
In addition to the 20% haircut, California also makes interest rate adjustment to the value if the insolvent insurance company’s rate is in excess of that provided in the CA Life & Health Insurance Guarantee Association.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Woot! »

Stinky wrote: Sat Jun 18, 2022 7:33 pm Also, realize that the MYGAs you be buying using funds from a free partial withdrawal would likely be pretty small. For example, if you have a $250k MYGA, a 10% free partial withdrawal is only $25k. You won’t get the highest rates at many companies with a deposit that small.
Perhaps MYGA withdrawals could be made more worthwhile by timing them to line up with the anniversary date?

For instance, let's say that the $250k MYGA was funded with a premium on July 1, 2020, with a contract allowing up to a 10% withdrawal per year. Is there a reason you couldn't set a withdrawal for June 30, 2022 (a 2nd-year withdrawal) and another withdrawal for 2 days later on July 2, 2022 (3rd-year withdrawal) for a total of $50k withdrawn, which could then be reinvested? If the MYGA you withdraw from is paying 2% interest and you are able to reinvest $50k of it at 4% interest, that's a $1,000 gain/year.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

Woot! wrote: Sun Jun 19, 2022 4:08 pm
Stinky wrote: Sat Jun 18, 2022 7:33 pm Also, realize that the MYGAs you be buying using funds from a free partial withdrawal would likely be pretty small. For example, if you have a $250k MYGA, a 10% free partial withdrawal is only $25k. You won’t get the highest rates at many companies with a deposit that small.
Perhaps MYGA withdrawals could be made more worthwhile by timing them to line up with the anniversary date?

For instance, let's say that the $250k MYGA was funded with a premium on July 1, 2020, with a contract allowing up to a 10% withdrawal per year. Is there a reason you couldn't set a withdrawal for June 30, 2022 (a 2nd-year withdrawal) and another withdrawal for 2 days later on July 2, 2022 (3rd-year withdrawal) for a total of $50k withdrawn, which could then be reinvested? If the MYGA you withdraw from is paying 2% interest and you are able to reinvest $50k of it at 4% interest, that's a $1,000 gain/year.
I agree that this could work - lining up two quick partial withdrawals from the same annuity on either side of the annuity anniversary date, and using the total proceeds to purchase a new MYGA using 1035 exchange.

If you wanted to try it, I'd definitely be in close contact with both the current and new insurance companies, before the fact, to make sure that everything lines up correctly.
Former life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by HueyLD »

Stinky wrote: Mon Jun 20, 2022 3:08 am
Woot! wrote: Sun Jun 19, 2022 4:08 pm
Stinky wrote: Sat Jun 18, 2022 7:33 pm Also, realize that the MYGAs you be buying using funds from a free partial withdrawal would likely be pretty small. For example, if you have a $250k MYGA, a 10% free partial withdrawal is only $25k. You won’t get the highest rates at many companies with a deposit that small.
Perhaps MYGA withdrawals could be made more worthwhile by timing them to line up with the anniversary date?

For instance, let's say that the $250k MYGA was funded with a premium on July 1, 2020, with a contract allowing up to a 10% withdrawal per year. Is there a reason you couldn't set a withdrawal for June 30, 2022 (a 2nd-year withdrawal) and another withdrawal for 2 days later on July 2, 2022 (3rd-year withdrawal) for a total of $50k withdrawn, which could then be reinvested? If the MYGA you withdraw from is paying 2% interest and you are able to reinvest $50k of it at 4% interest, that's a $1,000 gain/year.
I agree that this could work - lining up two quick partial withdrawals from the same annuity on either side of the annuity anniversary date, and using the total proceeds to purchase a new MYGA using 1035 exchange.

If you wanted to try it, I'd definitely be in close contact with both the current and new insurance companies, before the fact, to make sure that everything lines up correctly.
I think the OP needs to confirm directly with both the new and existing insurance companies to ensure that they allow 1035 exchange for “partial” account value. My prior 1035 exchanges required 100% transfer, not partial. However, different insurance companies may have different rules.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Chardo »

HueyLD wrote: Mon Jun 20, 2022 6:01 am
Stinky wrote: Mon Jun 20, 2022 3:08 am
Woot! wrote: Sun Jun 19, 2022 4:08 pm
Stinky wrote: Sat Jun 18, 2022 7:33 pm Also, realize that the MYGAs you be buying using funds from a free partial withdrawal would likely be pretty small. For example, if you have a $250k MYGA, a 10% free partial withdrawal is only $25k. You won’t get the highest rates at many companies with a deposit that small.
Perhaps MYGA withdrawals could be made more worthwhile by timing them to line up with the anniversary date?

For instance, let's say that the $250k MYGA was funded with a premium on July 1, 2020, with a contract allowing up to a 10% withdrawal per year. Is there a reason you couldn't set a withdrawal for June 30, 2022 (a 2nd-year withdrawal) and another withdrawal for 2 days later on July 2, 2022 (3rd-year withdrawal) for a total of $50k withdrawn, which could then be reinvested? If the MYGA you withdraw from is paying 2% interest and you are able to reinvest $50k of it at 4% interest, that's a $1,000 gain/year.
I agree that this could work - lining up two quick partial withdrawals from the same annuity on either side of the annuity anniversary date, and using the total proceeds to purchase a new MYGA using 1035 exchange.

If you wanted to try it, I'd definitely be in close contact with both the current and new insurance companies, before the fact, to make sure that everything lines up correctly.
I think the OP needs to confirm directly with both the new and existing insurance companies to ensure that they allow 1035 exchange for “partial” account value. My prior 1035 exchanges required 100% transfer, not partial. However, different insurance companies may have different rules.
I have yet to see any company allowing a partial 1035. Maybe there's one out there somewhere.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Woot! »

Chardo wrote: Mon Jun 20, 2022 8:36 am
HueyLD wrote: Mon Jun 20, 2022 6:01 am
Stinky wrote: Mon Jun 20, 2022 3:08 am
Woot! wrote: Sun Jun 19, 2022 4:08 pm
Stinky wrote: Sat Jun 18, 2022 7:33 pm Also, realize that the MYGAs you be buying using funds from a free partial withdrawal would likely be pretty small. For example, if you have a $250k MYGA, a 10% free partial withdrawal is only $25k. You won’t get the highest rates at many companies with a deposit that small.
Perhaps MYGA withdrawals could be made more worthwhile by timing them to line up with the anniversary date?

For instance, let's say that the $250k MYGA was funded with a premium on July 1, 2020, with a contract allowing up to a 10% withdrawal per year. Is there a reason you couldn't set a withdrawal for June 30, 2022 (a 2nd-year withdrawal) and another withdrawal for 2 days later on July 2, 2022 (3rd-year withdrawal) for a total of $50k withdrawn, which could then be reinvested? If the MYGA you withdraw from is paying 2% interest and you are able to reinvest $50k of it at 4% interest, that's a $1,000 gain/year.
I agree that this could work - lining up two quick partial withdrawals from the same annuity on either side of the annuity anniversary date, and using the total proceeds to purchase a new MYGA using 1035 exchange.

If you wanted to try it, I'd definitely be in close contact with both the current and new insurance companies, before the fact, to make sure that everything lines up correctly.
I think the OP needs to confirm directly with both the new and existing insurance companies to ensure that they allow 1035 exchange for “partial” account value. My prior 1035 exchanges required 100% transfer, not partial. However, different insurance companies may have different rules.
I have yet to see any company allowing a partial 1035. Maybe there's one out there somewhere.
Even if the 1035 exchange option isn't available, withdrawing up to 20% of a MYGA's value to reinvest at a higher rate could be appealing for some investors, for instance, investors who are okay with paying taxes that year on non-qualified MYGA income, who are over 59-1/2 (not subject to the “10% of interest earned” penalty), and whose "out of surrender" date is 2 or more years away.
Last edited by Woot! on Mon Jun 20, 2022 9:43 am, edited 1 time in total.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Chardo »

Woot! wrote: Mon Jun 20, 2022 9:11 am
Chardo wrote: Mon Jun 20, 2022 8:36 am
HueyLD wrote: Mon Jun 20, 2022 6:01 am
Stinky wrote: Mon Jun 20, 2022 3:08 am
Woot! wrote: Sun Jun 19, 2022 4:08 pm
Perhaps MYGA withdrawals could be made more worthwhile by timing them to line up with the anniversary date?

For instance, let's say that the $250k MYGA was funded with a premium on July 1, 2020, with a contract allowing up to a 10% withdrawal per year. Is there a reason you couldn't set a withdrawal for June 30, 2022 (a 2nd-year withdrawal) and another withdrawal for 2 days later on July 2, 2022 (3rd-year withdrawal) for a total of $50k withdrawn, which could then be reinvested? If the MYGA you withdraw from is paying 2% interest and you are able to reinvest $50k of it at 4% interest, that's a $1,000 gain/year.
I agree that this could work - lining up two quick partial withdrawals from the same annuity on either side of the annuity anniversary date, and using the total proceeds to purchase a new MYGA using 1035 exchange.

If you wanted to try it, I'd definitely be in close contact with both the current and new insurance companies, before the fact, to make sure that everything lines up correctly.
I think the OP needs to confirm directly with both the new and existing insurance companies to ensure that they allow 1035 exchange for “partial” account value. My prior 1035 exchanges required 100% transfer, not partial. However, different insurance companies may have different rules.
I have yet to see any company allowing a partial 1035. Maybe there's one out there somewhere.
Even if the 1035 exchange option isn't available, withdrawing up to 20% of a MYGA's value to reinvest at a higher rate could be appealing for some investors, for instance, investors who are okay with taking capital gains on non-qualified MYGAs, who are over 59-1/2 (not subject to the “10% of interest earned” penalty), and whose "out of surrender" date is 2 or more years away.
Yes, that might appeal to some. Though it would be ordinary income, not capital gain.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Woot! »

Chardo wrote: Mon Jun 20, 2022 9:22 am
Woot! wrote: Mon Jun 20, 2022 9:11 am
Chardo wrote: Mon Jun 20, 2022 8:36 am
HueyLD wrote: Mon Jun 20, 2022 6:01 am
Stinky wrote: Mon Jun 20, 2022 3:08 am

I agree that this could work - lining up two quick partial withdrawals from the same annuity on either side of the annuity anniversary date, and using the total proceeds to purchase a new MYGA using 1035 exchange.

If you wanted to try it, I'd definitely be in close contact with both the current and new insurance companies, before the fact, to make sure that everything lines up correctly.
I think the OP needs to confirm directly with both the new and existing insurance companies to ensure that they allow 1035 exchange for “partial” account value. My prior 1035 exchanges required 100% transfer, not partial. However, different insurance companies may have different rules.
I have yet to see any company allowing a partial 1035. Maybe there's one out there somewhere.
Even if the 1035 exchange option isn't available, withdrawing up to 20% of a MYGA's value to reinvest at a higher rate could be appealing for some investors, for instance, investors who are okay with taking capital gains on non-qualified MYGAs, who are over 59-1/2 (not subject to the “10% of interest earned” penalty), and whose "out of surrender" date is 2 or more years away.
Yes, that might appeal to some. Though it would be ordinary income, not capital gain.
Whoops, yes, of course; need my morning coffee. Edited to correct this.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by indexfundfan »

I briefly considered early withdrawals for two of my non-qualified MYGAs (5-yr paying 2.65% & 2.7%, about 44-mo remaining). Just to confirm, any such withdrawal would be considered to come from the earnings first before the principal?

For example, an initial $100k MYGA has grown to $110k. If I make a $11k withdrawal, $10k would be considered earnings and subject to tax (with early penalty of 10% if under 59.5). The remaining $1k would be considered from principal and not taxable.

After the withdrawal, the cost basis of the MYGA would be $99k. I would need to check this cost basis carefully on maturity because insurers have been known to make mistakes on the 1099 (reference to BarbK's earlier post viewtopic.php?p=6735079#p6735079)

Is my understanding correct?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Chardo »

indexfundfan wrote: Mon Jun 20, 2022 10:02 am I briefly considered early withdrawals for two of my non-qualified MYGAs (5-yr paying 2.65% & 2.7%, about 44-mo remaining). Just to confirm, any such withdrawal would be considered to come from the earnings first before the principal?

For example, an initial $100k MYGA has grown to $110k. If I make a $11k withdrawal, $10k would be considered earnings and subject to tax (with early penalty of 10% if under 59.5). The remaining $1k would be considered from principal and not taxable.

After the withdrawal, the cost basis of the MYGA would be $99k. I would need to check this cost basis carefully on maturity because insurers have been known to make mistakes on the 1099 (reference to BarbK's earlier post viewtopic.php?p=6735079#p6735079)

Is my understanding correct?
Correct.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by indexfundfan »

Thanks. It is tempting to do the 10% partial surrender to put the money to work at a higher rate, but it does create some additional paperwork which I will have to track (non-qualified funds).
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by indexfundfan »

I am wondering if anyone has done a 1035 exchange recently, e.g. you want to use the proceeds of a recently matured MYGA to buy a MYGA from another insurer?

Do you need to contact the old insurer to give them instructions where to send the funds? Or is it like a brokerage transfer where you only need to contact the new broker to initiate the transfer?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Chardo »

indexfundfan wrote: Wed Jun 22, 2022 1:42 pm I am wondering if anyone has done a 1035 exchange recently, e.g. you want to use the proceeds of a recently matured MYGA to buy a MYGA from another insurer?

Do you need to contact the old insurer to give them instructions where to send the funds? Or is it like a brokerage transfer where you only need to contact the new broker to initiate the transfer?
The new company does all the work.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Wrench »

indexfundfan wrote: Wed Jun 22, 2022 1:42 pm I am wondering if anyone has done a 1035 exchange recently, e.g. you want to use the proceeds of a recently matured MYGA to buy a MYGA from another insurer?

Do you need to contact the old insurer to give them instructions where to send the funds? Or is it like a brokerage transfer where you only need to contact the new broker to initiate the transfer?
I tried to 1035 two old whole life insurance policies. The new company made the request and nothing happened. One month in, I called the life insurance companies and they had no record of the requests. When I followed up with the agent, they said the new company "does not call to follow up" with the requests because they won't talk to anyone but the policy holder. Both companies told me they WOULD talk to the requesting company. Since rates have gone up since my initial request, I just cancelled it. I will try again, probably with a different company, this summer. As it turned out, the wait will be to my benefit, but it still was annoying.

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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by indexfundfan »

Wrench wrote: Wed Jun 22, 2022 2:29 pm
indexfundfan wrote: Wed Jun 22, 2022 1:42 pm I am wondering if anyone has done a 1035 exchange recently, e.g. you want to use the proceeds of a recently matured MYGA to buy a MYGA from another insurer?

Do you need to contact the old insurer to give them instructions where to send the funds? Or is it like a brokerage transfer where you only need to contact the new broker to initiate the transfer?
I tried to 1035 two old whole life insurance policies. The new company made the request and nothing happened. One month in, I called the life insurance companies and they had no record of the requests. When I followed up with the agent, they said the new company "does not call to follow up" with the requests because they won't talk to anyone but the policy holder. Both companies told me they WOULD talk to the requesting company. Since rates have gone up since my initial request, I just cancelled it. I will try again, probably with a different company, this summer. As it turned out, the wait will be to my benefit, but it still was annoying.

Wrench
Thanks. This doesn't inspire confidence in the process, with both old insurers not motivated to send out the funds.

Hope you have better luck this summer.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Chardo »

Wrench wrote: Wed Jun 22, 2022 2:29 pm
indexfundfan wrote: Wed Jun 22, 2022 1:42 pm I am wondering if anyone has done a 1035 exchange recently, e.g. you want to use the proceeds of a recently matured MYGA to buy a MYGA from another insurer?

Do you need to contact the old insurer to give them instructions where to send the funds? Or is it like a brokerage transfer where you only need to contact the new broker to initiate the transfer?
I tried to 1035 two old whole life insurance policies. The new company made the request and nothing happened. One month in, I called the life insurance companies and they had no record of the requests. When I followed up with the agent, they said the new company "does not call to follow up" with the requests because they won't talk to anyone but the policy holder. Both companies told me they WOULD talk to the requesting company. Since rates have gone up since my initial request, I just cancelled it. I will try again, probably with a different company, this summer. As it turned out, the wait will be to my benefit, but it still was annoying.

Wrench
1035 of life insurance can sometimes be a different procedure. You are assigning ownership of that policy to the new company, after which that new owner is surrendering your coverage. Some carriers want their own paperwork or instructions directly from you.
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