Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
User avatar
Topic Author
Stinky
Posts: 10916
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

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

Post by Stinky »

BlackcatCA wrote: Sat Nov 12, 2022 1:33 pm Yes I am in CA, and I was using 50k with the calculator. Wow, did not know there are additional taxes on annuities— does it mean I will get taxed when the MYGA term ends?

Also have not seen state differences in rates before and did not expect such a large difference. Maybe MYGA is not a good product for us living in CA?

Thanks to this group I learn something new today.
Presuming that you're investing using taxable (that is, not IRA or Roth) funds, you'll have taxable income when the MYGA term ends, unless you do a "1035 exchange" into another annuity. Such an exchange defers, but does not avoid, the reporting of taxable income.

I know that MYGA interest is taxable income for Federal purposes. I suspect it is also taxable income for California purposes, but you'd need to check that out.

You're correct that annuities in general, and MYGAs in particular, are not as attractive for California residents as for residents of most other states. That annuity premium tax is a really killer on a short-term product like a MYGA. Further, the guaranty fund coverage in California is on 80% of the surrender value, vs. 100% coverage in every other state that I know of.

I'd be much less inclined to buy a MYGA if I lived in California.
Retired life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
Wrench
Posts: 714
Joined: Sun Apr 28, 2019 10:21 am

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

Post by Wrench »

Stinky wrote: Sat Nov 12, 2022 1:34 pm
GaryA505 wrote: Sat Nov 12, 2022 1:23 pm
rich126 wrote: Sat Nov 12, 2022 6:07 am This isn't exactly a MYGA question but I suppose related to it. I'm looking for something that will start payments in maybe 3 years and pay out for 7 years beyond that (say from 63-70). Would this be more of a deferred annuity? I've looked at immediate annuities and see payouts for 5 yrs and 10 yrs. I assume they would have one for other years as well.

When I tried to recreate their payments for a 10 yr period using treasuries, I can never get the same returns as they do. I assume it is due to the possibility of us passing away and thus the insurance company keeping the remainder.

Anyhow, would this fall into a MYGA? Although I suppose a MYGA is just a variant of an annuity anyhow.
How about a MYGA ladder? 3, 4, 5, 6, 7, 8, 9 and 10 year terms.
That's actually a pretty good idea.

Rich126 could determine exactly what interest he's earning using this approach.
If it were me, I would build a treasury ladder using STRIPS, one for each year 3 through 10. Far easier to accomplish, zero risk and only a slight penalty in return right now. But, if it were in a taxable account you would have to pay tax on the phantom income from the STRIPS each year. Not so much of a problem in years 3-10 because your STRIPS will give you income, but in years 0, 1 and 2 you would have to have other sources of income to pay the OID tax. If you build it in a tax-deferred account no tax to worry about until you withdraw.

Wrench
rich126
Posts: 3439
Joined: Thu Mar 01, 2018 4:56 pm

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

Post by rich126 »

Wrench wrote: Sat Nov 12, 2022 4:23 pm
Stinky wrote: Sat Nov 12, 2022 1:34 pm
GaryA505 wrote: Sat Nov 12, 2022 1:23 pm
rich126 wrote: Sat Nov 12, 2022 6:07 am This isn't exactly a MYGA question but I suppose related to it. I'm looking for something that will start payments in maybe 3 years and pay out for 7 years beyond that (say from 63-70). Would this be more of a deferred annuity? I've looked at immediate annuities and see payouts for 5 yrs and 10 yrs. I assume they would have one for other years as well.

When I tried to recreate their payments for a 10 yr period using treasuries, I can never get the same returns as they do. I assume it is due to the possibility of us passing away and thus the insurance company keeping the remainder.

Anyhow, would this fall into a MYGA? Although I suppose a MYGA is just a variant of an annuity anyhow.
How about a MYGA ladder? 3, 4, 5, 6, 7, 8, 9 and 10 year terms.
That's actually a pretty good idea.

Rich126 could determine exactly what interest he's earning using this approach.
If it were me, I would build a treasury ladder using STRIPS, one for each year 3 through 10. Far easier to accomplish, zero risk and only a slight penalty in return right now. But, if it were in a taxable account you would have to pay tax on the phantom income from the STRIPS each year. Not so much of a problem in years 3-10 because your STRIPS will give you income, but in years 0, 1 and 2 you would have to have other sources of income to pay the OID tax. If you build it in a tax-deferred account no tax to worry about until you withdraw.

Wrench
I don't know why but I'm still trying to understand STRIPS function and how to buy them and I've bought almost anything over the years (options, futures, metals, treasuries). I'll have to google it to read some examples.

I might do something like buy some 5 year TIPS for inflation protection along with some treasuries/MYGAs or whatever seems to give a solid rate and makes sense. I'm still pondering whether I will work (part/all) next year. I might also want a year or two with low income to do some Roth conversions and also have some inherited money I'll have to pay taxes on and want to do that before social security kicks in.

Thanks. Lots of different ideas.
----------------------------- | If you think something is important and it doesn't involve the health of someone, think again. Life goes too fast, enjoy it and be nice.
bog007
Posts: 386
Joined: Fri Feb 28, 2020 3:27 am

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

Post by bog007 »

Guaranty Income Life 5.3 3 year A-
5 year 5.6%
Don’t let anyone else ruin your portfolio. It’s your portfolio. Ruin it yourself!!!
User avatar
vineviz
Posts: 14180
Joined: Tue May 15, 2018 1:55 pm
Location: Baltimore, MD

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

Post by vineviz »

rich126 wrote: Sun Nov 13, 2022 6:40 am I don't know why but I'm still trying to understand STRIPS function and how to buy them and I've bought almost anything over the years (options, futures, metals, treasuries). I'll have to google it to read some examples.
STRIPS are about as uncomplicated as gets when it comes to an investment.


Pay $xxx today, receive $1,000 when the bond matures.

There are literally no other cash flows involved. Nothing to reinvest, etc.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
User avatar
abuss368
Posts: 26968
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

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

Post by abuss368 »

vineviz wrote: Mon Nov 14, 2022 2:41 pm
rich126 wrote: Sun Nov 13, 2022 6:40 am I don't know why but I'm still trying to understand STRIPS function and how to buy them and I've bought almost anything over the years (options, futures, metals, treasuries). I'll have to google it to read some examples.
STRIPS are about as uncomplicated as gets when it comes to an investment.


Pay $xxx today, receive $1,000 when the bond matures.

There are literally no other cash flows involved. Nothing to reinvest, etc.
Hi Vince -

This is why you are an asset to the forum and your posts provide a lot of educational content to Bogleheads!

I for one appreciate the knowledge share.

Best.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
User avatar
sergeant
Posts: 1832
Joined: Tue Dec 04, 2007 11:13 pm
Location: The Golden State

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

Post by sergeant »

Stinky wrote: Sat Nov 12, 2022 1:44 pm
BlackcatCA wrote: Sat Nov 12, 2022 1:33 pm Yes I am in CA, and I was using 50k with the calculator. Wow, did not know there are additional taxes on annuities— does it mean I will get taxed when the MYGA term ends?

Also have not seen state differences in rates before and did not expect such a large difference. Maybe MYGA is not a good product for us living in CA?

Thanks to this group I learn something new today.
Presuming that you're investing using taxable (that is, not IRA or Roth) funds, you'll have taxable income when the MYGA term ends, unless you do a "1035 exchange" into another annuity. Such an exchange defers, but does not avoid, the reporting of taxable income.

I know that MYGA interest is taxable income for Federal purposes. I suspect it is also taxable income for California purposes, but you'd need to check that out.

You're correct that annuities in general, and MYGAs in particular, are not as attractive for California residents as for residents of most other states. That annuity premium tax is a really killer on a short-term product like a MYGA. Further, the guaranty fund coverage in California is on 80% of the surrender value, vs. 100% coverage in every other state that I know of.

I'd be much less inclined to buy a MYGA if I lived in California.
Hi Stinky, thanks for all your expertise on MYGA's. Would you still avoid MYGA's in California if one was to stick only with A+ rated issuers? I recently purchased 3 of them, right at 200k each, from 3 different A+ companies. I matched my outstanding mortgage balance which is at 3% with the same amount in MYGA's at just above 5%.
For the ashes of his fathers, And the temples of his gods. | Pensions= 2X yearly expenses. Portfolio= 40X yearly expenses.
User avatar
Topic Author
Stinky
Posts: 10916
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

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

Post by Stinky »

sergeant wrote: Mon Nov 14, 2022 5:42 pm Hi Stinky, thanks for all your expertise on MYGA's. Would you still avoid MYGA's in California if one was to stick only with A+ rated issuers? I recently purchased 3 of them, right at 200k each, from 3 different A+ companies. I matched my outstanding mortgage balance which is at 3% with the same amount in MYGA's at just above 5%.
I would have no concerns in buying a MYGA from a company rated A+ by AM Best.

Zero concerns.

Sounds like you did a nice arbitrage. Congratulations.
Retired life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
User avatar
HueyLD
Posts: 9288
Joined: Mon Jan 14, 2008 10:30 am

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

Post by HueyLD »

Stinky wrote: Sat Nov 12, 2022 1:44 pm You're correct that annuities in general, and MYGAs in particular, are not as attractive for California residents as for residents of most other states. That annuity premium tax is a really killer on a short-term product like a MYGA. Further, the guaranty fund coverage in California is on 80% of the surrender value, vs. 100% coverage in every other state that I know of.

I'd be much less inclined to buy a MYGA if I lived in California.
There is no premium tax on MYGAs in California unless one annuitizes MYGAs.

https://www.immediateannuities.com/state-premium-tax/
User avatar
Topic Author
Stinky
Posts: 10916
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

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

Post by Stinky »

HueyLD wrote: Mon Nov 14, 2022 8:27 pm
Stinky wrote: Sat Nov 12, 2022 1:44 pm You're correct that annuities in general, and MYGAs in particular, are not as attractive for California residents as for residents of most other states. That annuity premium tax is a really killer on a short-term product like a MYGA. Further, the guaranty fund coverage in California is on 80% of the surrender value, vs. 100% coverage in every other state that I know of.

I'd be much less inclined to buy a MYGA if I lived in California.
There is no premium tax on MYGAs in California unless one annuitizes MYGAs.

https://www.immediateannuities.com/state-premium-tax/
Yes, you’re right.

There must be some other reason why some companies credit lower rates on California business than on business from other states. Maybe California mandates some “consumer benefits” that are optional in other states?
Retired life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
PatrickA5
Posts: 707
Joined: Mon Jul 28, 2014 1:55 pm

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

Post by PatrickA5 »

Are there any companies that pay out interest monthly on MYGA's? The ones I have now allow 10% withdrawals, but I would have to go through the hassled on doing those withdrawals each year.
User avatar
Topic Author
Stinky
Posts: 10916
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

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

Post by Stinky »

PatrickA5 wrote: Tue Nov 15, 2022 11:41 am Are there any companies that pay out interest monthly on MYGA's? The ones I have now allow 10% withdrawals, but I would have to go through the hassled on doing those withdrawals each year.
Not that I’m aware of.

Life insurance companies are not generally on the cutting edge of consumer-friendly systems. (I know this from first hand experience :D )
Retired life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
PatrickA5
Posts: 707
Joined: Mon Jul 28, 2014 1:55 pm

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

Post by PatrickA5 »

Stinky wrote: Tue Nov 15, 2022 11:55 am
PatrickA5 wrote: Tue Nov 15, 2022 11:41 am Are there any companies that pay out interest monthly on MYGA's? The ones I have now allow 10% withdrawals, but I would have to go through the hassled on doing those withdrawals each year.
Not that I’m aware of.

Life insurance companies are not generally on the cutting edge of consumer-friendly systems. (I know this from first hand experience :D )
I didn't think so. Thanks for the reply!
retireIn2020
Posts: 310
Joined: Sat Jan 04, 2020 6:13 pm

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

Post by retireIn2020 »

PatrickA5 wrote: Tue Nov 15, 2022 11:41 am Are there any companies that pay out interest monthly on MYGA's? The ones I have now allow 10% withdrawals, but I would have to go through the hassled on doing those withdrawals each year.
With Nationwide I can set up a scheduled withdrawal at a set percentage on a weekly/monthly/quarterly/yearly basis. Takes about 5 minutes or less to fill out/submit the online form one time or until you want to change it. You have the option of selecting a specified percentage or fixed dollar amount, taxes, both fed and state (or not), direct deposit or by mail.
Doesn't seem like a hassle. I would think other companies would be similar if withdrawals are allowed.
Retired as of July 2020
GaryA505
Posts: 1722
Joined: Wed Feb 08, 2017 2:59 pm
Location: New Mexico

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

Post by GaryA505 »

I was just wondering if anyone else is considering using MYGAs (maybe laddered) as a way to handle "lumpy" expenses in retirement. For example, let's say you have set up your known annual base income with SS/pension/RMD/annuity. Let's say you're also on the steep part of the SS taxation phase-in so you don't want to take income unless you need to, or just decide you want to. However, you might have some one-time, occasional expenses that are not known in advance and not recuring. So, you have a few smaller MYGAs and/or larger MYGAs with 10% annual free withdrawals. If an expense comes up, you either cash out a MYGA or take a withdrawal. Why would you do this? Because you're not taking income from these assets (and paying the taxes) unless you decide to, or need to. Meanwhile, the interest is accumulating tax-deferred, and later any remaining MYGAs could be exchanged (tax-deferred) into an income annuity if you decide that's what you want.

Does this make sense to anyone besides me?
Get most of it right and don't make any big mistakes. Other things being equal (or close enough), simpler is better.
User avatar
sergeant
Posts: 1832
Joined: Tue Dec 04, 2007 11:13 pm
Location: The Golden State

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

Post by sergeant »

GaryA505 wrote: Tue Nov 15, 2022 12:52 pm I was just wondering if anyone else is considering using MYGAs (maybe laddered) as a way to handle "lumpy" expenses in retirement. For example, let's say you have set up your known annual base income with SS/pension/RMD/annuity. Let's say you're also on the steep part of the SS taxation phase-in so you don't want to take income unless you need to, or just decide you want to. However, you might have some one-time, occasional expenses that are not known in advance and not recuring. So, you have a few smaller MYGAs and/or larger MYGAs with 10% annual free withdrawals. If an expense comes up, you either cash out a MYGA or take a withdrawal. Why would you do this? Because you're not taking income from these assets (and paying the taxes) unless you decide to, or need to. Meanwhile, the interest is accumulating tax-deferred, and later any remaining MYGAs could be exchanged (tax-deferred) into an income annuity if you decide that's what you want.

Does this make sense to anyone besides me?
The only problem is that there is a penalty for "cashing out" the MYGA. There is no penalty for the 10% annual withdrawal if your MYGA allows them.
For the ashes of his fathers, And the temples of his gods. | Pensions= 2X yearly expenses. Portfolio= 40X yearly expenses.
GaryA505
Posts: 1722
Joined: Wed Feb 08, 2017 2:59 pm
Location: New Mexico

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

Post by GaryA505 »

sergeant wrote: Tue Nov 15, 2022 10:38 pm
GaryA505 wrote: Tue Nov 15, 2022 12:52 pm I was just wondering if anyone else is considering using MYGAs (maybe laddered) as a way to handle "lumpy" expenses in retirement. For example, let's say you have set up your known annual base income with SS/pension/RMD/annuity. Let's say you're also on the steep part of the SS taxation phase-in so you don't want to take income unless you need to, or just decide you want to. However, you might have some one-time, occasional expenses that are not known in advance and not recuring. So, you have a few smaller MYGAs and/or larger MYGAs with 10% annual free withdrawals. If an expense comes up, you either cash out a MYGA or take a withdrawal. Why would you do this? Because you're not taking income from these assets (and paying the taxes) unless you decide to, or need to. Meanwhile, the interest is accumulating tax-deferred, and later any remaining MYGAs could be exchanged (tax-deferred) into an income annuity if you decide that's what you want.

Does this make sense to anyone besides me?
The only problem is that there is a penalty for "cashing out" the MYGA. There is no penalty for the 10% annual withdrawal if your MYGA allows them.
Sorry I shouldn't have used the term "cashing out" without defining what I meant by that, which is simply taking the cash when it matures. There is no penalty for that, of course.
Get most of it right and don't make any big mistakes. Other things being equal (or close enough), simpler is better.
webtrojan
Posts: 19
Joined: Wed May 25, 2022 1:12 pm

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

Post by webtrojan »

Stinky wrote: Sat Sep 24, 2022 1:30 pm
bog007 wrote: Sat Sep 24, 2022 12:17 pm Wonder when the myga rates are going to go up. You can a 1 year treasury or cd over 4 percent
I got an email yesterday from My Annuity Store, announcing the first MYGA in recent times with a rate higher than 5%.

Ibexis Life, a brand new entrant into the MYGA space rated A- by AM Best, announced a rate of 5.10% on 5 year and 7 year MYGAs, and 4.60% on 3 year MYGAs. The product is available as a straight MYGA. It also has an option to include an equity-indexed "kicker" on up to one-half of the account value, where a rate of 7-7.5% will be credited if the S&P 500 is higher on a policy anniversary than on the prior anniversary (and credit zero if the index is lower).

I don't know how many states have approved this Ibexis product. I also don't know whether the company's products will be carried on other annuity platforms like Blueprint Income and Stan the Annuity Man.
Stinky - I see where Ibexis is now at 6% for a 5 or 7 year MYGA. Highest rate I’m seeing now. Have you ever used My Annuity Store?
User avatar
Topic Author
Stinky
Posts: 10916
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

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

Post by Stinky »

webtrojan wrote: Wed Nov 16, 2022 1:20 am
Stinky wrote: Sat Sep 24, 2022 1:30 pm
bog007 wrote: Sat Sep 24, 2022 12:17 pm Wonder when the myga rates are going to go up. You can a 1 year treasury or cd over 4 percent
I got an email yesterday from My Annuity Store, announcing the first MYGA in recent times with a rate higher than 5%.

Ibexis Life, a brand new entrant into the MYGA space rated A- by AM Best, announced a rate of 5.10% on 5 year and 7 year MYGAs, and 4.60% on 3 year MYGAs. The product is available as a straight MYGA. It also has an option to include an equity-indexed "kicker" on up to one-half of the account value, where a rate of 7-7.5% will be credited if the S&P 500 is higher on a policy anniversary than on the prior anniversary (and credit zero if the index is lower).

I don't know how many states have approved this Ibexis product. I also don't know whether the company's products will be carried on other annuity platforms like Blueprint Income and Stan the Annuity Man.
Stinky - I see where Ibexis is now at 6% for a 5 or 7 year MYGA. Highest rate I’m seeing now. Have you ever used My Annuity Store?
I also see the Ibexis rate on the "My Annuity Store" website. I'm seeing 6% for 5 years for $100k or more, and 5.65% for smaller MYGAs down to $10k.

I'm not seeing Ibexis rates at all on 3 year and 7 year products on My Annuity Store website. But if I go to the Ibexis company webpage, I see the 6% rate also on 7 year MYGAs, and 5.35% on 3 year MYGAs for $100k+ purchases.

My post that you quoted was dated 9/24/22, almost 2 months ago. I'm still not finding Ibexis listed as a carrier on the other sites that I regularly visit (Blueprint Income, Stan the Annuity Man, and Annuity Advantage). I wonder why Ibexis hasn't gotten their products into those agencies yet.

I've never used My Annuity Store. If you do choose to go with them, I'd be interested if you'd post back your experience with that agency. Looking at the My Annuity Store website, they do list a number of "familiar" companies that are on other agency websites.

Maybe Ibexis is being flooded with applications right now with this limited distribution. I expect that Ibexis would be inundated with business if they had more agencies selling their product.
Retired life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
aXlniM5gE9rBs
Posts: 34
Joined: Fri Jul 22, 2022 7:28 am

Ibexis on Annuity Advantage

Post by aXlniM5gE9rBs »

Here is how Annuity Advantage specifies Ibexis' 5-year annuity rate:
5 Year Guarantee Period Annual Yield: 5.39%
Simple interest rate start of year 1 through end of year 5: 6.00%
I don't understand the rates provided. For interest rates, simple interest is less than the annual yield, when interest is compounded. With fixed deferred annuities, interest is generally compounded daily, to calculate the annual yield.

https://www.annuityadvantage.com/multi- ... ga-plus-5/
User avatar
Topic Author
Stinky
Posts: 10916
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Ibexis on Annuity Advantage

Post by Stinky »

aXlniM5gE9rBs wrote: Wed Nov 16, 2022 8:24 am Here is how Annuity Advantage specifies Ibexis' 5-year annuity rate:
5 Year Guarantee Period Annual Yield: 5.39%
Simple interest rate start of year 1 through end of year 5: 6.00%
I don't understand the rates provided. For interest rates, simple interest is less than the annual yield, when interest is compounded. With fixed deferred annuities, interest is generally compounded daily, to calculate the annual yield.

https://www.annuityadvantage.com/multi- ... ga-plus-5/
Ah hah! You’ve provided the missing link, and illuminated a sales practice that is BLATENTLY MISLEADING.

If you take the yield of 5.39%, and compound it over 5 years, you get 1.0539 ^ 5 = 1.3002. So, you’re earning a total of $30,000 in interest over 5 years, or an average of $6,000 per year, on a premium of $100,000. That’s a “rate” of 6% on the initial premium, not compounded.

I’m disappointed that Ibexis Life would post such materially misleading information on their website, and that The Annuity Store would pick up this garbage and run with it.

It’s encouraging to see that Annuity Advantage is showing the real interest rate from Ibexis at 5.39%. Kudos to them for posting accurate information. (And that’s why I didn’t see it on their website on my first pass - I was looking for 6%).

Deceitful marketing tactics spotted in the MYGA space! Disappointing to say the least.
Retired life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
aXlniM5gE9rBs
Posts: 34
Joined: Fri Jul 22, 2022 7:28 am

Re: Ibexis on Annuity Advantage

Post by aXlniM5gE9rBs »

Stinky wrote: Wed Nov 16, 2022 8:42 am If you take the yield of 5.39%, and compound it over 5 years, you get 1.0539 ^ 5 = 1.3002. So, you’re earning a total of $30,000 in interest over 5 years, or an average of $6,000 per year, on a premium of $100,000. That’s a “rate” of 6% on the initial premium, not compounded.
Thanks. That is confusing. I contacted Annuity Store and hopefully it is inadvertent on their part. As a regulated industry, the interest rate advertised should be regulated as it is with bank products, especially when so many annuity companies casually refer to "CD type" MYGAs.

With a different company, Annuity Advantage lists the yield and interest (but not "simple" interest) as the same rate.
5 Year Guarantee Period Annual Yield: 5.60%
Interest rate start of year 1 through end of year 5: 5.60%
https://www.annuityadvantage.com/multi- ... ith-mva-5/
webtrojan
Posts: 19
Joined: Wed May 25, 2022 1:12 pm

Re: Ibexis on Annuity Advantage

Post by webtrojan »

aXlniM5gE9rBs wrote: Wed Nov 16, 2022 9:18 am
Stinky wrote: Wed Nov 16, 2022 8:42 am If you take the yield of 5.39%, and compound it over 5 years, you get 1.0539 ^ 5 = 1.3002. So, you’re earning a total of $30,000 in interest over 5 years, or an average of $6,000 per year, on a premium of $100,000. That’s a “rate” of 6% on the initial premium, not compounded.
Thanks. That is confusing. I contacted Annuity Store and hopefully it is inadvertent on their part. As a regulated industry, the interest rate advertised should be regulated as it is with bank products, especially when so many annuity companies casually refer to "CD type" MYGAs.

With a different company, Annuity Advantage lists the yield and interest (but not "simple" interest) as the same rate.
5 Year Guarantee Period Annual Yield: 5.60%
Interest rate start of year 1 through end of year 5: 5.60%
https://www.annuityadvantage.com/multi- ... ith-mva-5/
Wow, that IS misleading. Thanks aXiniM5gE9rBs and Stinky. Saved me some time in researching. Too good to be true I guess.
aXlniM5gE9rBs
Posts: 34
Joined: Fri Jul 22, 2022 7:28 am

Beware - Simple Interest - Ibexis

Post by aXlniM5gE9rBs »

So, the problem with Ibexis appears to be its use of the phrase "simple" interest.

They use it in their marketing material. Click the rate sheet.

https://ibexis.com/multi-year-guaranteed-annuities

And, the contract itself. That I received, but won't bother posting.

Yet, I still think it is misleading. Nearly all fixed-income pays "simple interest," that is then compounded. (Excluding zero coupon, annual coupon payments, etc.). Bonds pay interest, that the owner then compounds, elsewhere. Nowhere do I see, that Ibexis specifies interest does NOT compound. I suppose a person could withdraw the interest each year.

So, be sure to read your contracts, and ask questions. If you own something, make sure the interest increases a little bit each day. For examle, if your contract pays 4% annually, it should increase by a bit more than 1% after 3 months, due to compounding. It should start accumulating ~ .04/365 on day one, and increase a bit each day.

Would be curious if anyone else has seen "simple" interest used by other companies.

Good luck to everyone who tries to be responsible. From my perspective, annuities should be required to list both the Interest Rate and Annual Yield, just like banks, in big red print right on the term sheet.
Grover1318
Posts: 5
Joined: Sat Jan 26, 2019 1:35 pm

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

Post by Grover1318 »

Hi Stinky,
Would you be able to clarify how the premium and interest are transferred back to the brokerage firm where the funds originated? This is assuming that both the MYGA and originating brokerage accounts are traditional IRAs. Would such transfer be done via a 1035, or would it be a trustee-to-trustee transfer? I’ve seen references to both but it’s confusing as to whether there are any differences between the two methods.
Thanks,
Grover
User avatar
Topic Author
Stinky
Posts: 10916
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

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

Post by Stinky »

Grover1318 wrote: Sat Nov 19, 2022 9:48 pm Hi Stinky,
Would you be able to clarify how the premium and interest are transferred back to the brokerage firm where the funds originated? This is assuming that both the MYGA and originating brokerage accounts are traditional IRAs. Would such transfer be done via a 1035, or would it be a trustee-to-trustee transfer? I’ve seen references to both but it’s confusing as to whether there are any differences between the two methods.
Thanks,
Grover
Grover, when moving from one IRA to another, that’s a trustee to trustee transfer. It is such a transfer whether you’re moving from one annuity to another, from one brokerage account to another, or between a brokerage account and an annuity (either way).

When money is moving from one taxable annuity to another, that’s when a 1035 exchange comes into play. 1035 exchanges can also occur between two taxable life insurance policy, or from a taxable life insurance policy to an annuity.

The practical effects of a trustee to trustee transfer and a 1035 exchange are similar. In both transactions, there is no current taxable income reported. But the paperwork is a little different.

Hope that answers your question.
Retired life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
User avatar
indexfundfan
Posts: 3657
Joined: Tue Feb 20, 2007 11:21 am
Contact:

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

Post by indexfundfan »

I requested a few penalty-free partial withdrawals recently as well as in July. Most of them were completed in a timely manner. The best were American Equity and Gainbridge, crediting me within a week after I submitted the requests.

The worst has to be Americo. In my recent request, after waiting for two weeks with no movement, I called them. They said that their processing time is 15 business days, i.e. effectively three weeks. It's now almost three weeks and I'm hoping they will release my funds this week.
My signature has been deleted.
User avatar
krafty81
Posts: 514
Joined: Thu Jul 05, 2018 2:01 pm
Location: San Diego, CA

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

Post by krafty81 »

Agree with Americo. It was a SLOW process to invest with a new MYGA I just started.
User avatar
Topic Author
Stinky
Posts: 10916
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Beware - Simple Interest - Ibexis

Post by Stinky »

aXlniM5gE9rBs wrote: Thu Nov 17, 2022 1:57 pm So, the problem with Ibexis appears to be its use of the phrase "simple" interest.

They use it in their marketing material. Click the rate sheet.

https://ibexis.com/multi-year-guaranteed-annuities

And, the contract itself. That I received, but won't bother posting.

Yet, I still think it is misleading. Nearly all fixed-income pays "simple interest," that is then compounded. (Excluding zero coupon, annual coupon payments, etc.). Bonds pay interest, that the owner then compounds, elsewhere. Nowhere do I see, that Ibexis specifies interest does NOT compound. I suppose a person could withdraw the interest each year.

So, be sure to read your contracts, and ask questions. If you own something, make sure the interest increases a little bit each day. For examle, if your contract pays 4% annually, it should increase by a bit more than 1% after 3 months, due to compounding. It should start accumulating ~ .04/365 on day one, and increase a bit each day.

Would be curious if anyone else has seen "simple" interest used by other companies.

Good luck to everyone who tries to be responsible. From my perspective, annuities should be required to list both the Interest Rate and Annual Yield, just like banks, in big red print right on the term sheet.
I’ve been in contact with Jason, who is associated with The Annuity Store, which lists the Ibexis 5 year product as its “best fixed annuity rate” at 6%.

Of course, as noted upthread, the 6% rate is based on “simple” interest. The rate comparable to the presentation on other websites is 5.39% - still a strong rate for a 5 year product, but not the “best”.

Jason says he always stresses the “simple” nature of the interest when he talks to a potential client. He finds the product useful for folks who want to take a monthly distribution after the first policy year.

I’ve pointed out to Jason that the presentation of the Ibexis 5 year product is inconsistent with the presentation of other products on his website. But as of today, the presentation remains unchanged.

I think that the presentation of the Ibexis 5 year product on The Annuity Store website is at best inconsistent with other products, and is at worst blatantly misleading. But it’s a private website, and it can choose to display products however it chooses.
Retired life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
aXlniM5gE9rBs
Posts: 34
Joined: Fri Jul 22, 2022 7:28 am

Re: Beware - Simple Interest - Ibexis

Post by aXlniM5gE9rBs »

Stinky wrote: Tue Nov 22, 2022 10:02 am I’ve pointed out to Jason that the presentation of the Ibexis 5 year product is inconsistent with the presentation of other products on his website. But as of today, the presentation remains unchanged.

I think that the presentation of the Ibexis 5 year product on The Annuity Store website is at best inconsistent with other products, and is at worst blatantly misleading. But it’s a private website, and it can choose to display products however it chooses.
Ibexis' 7-year rate is also 6%. But it is not listed as the highest 7-year rate, on Annuity Store's website. So yes, that company is being inconsistent.

https://myannuitystore.com/annuities/fi ... es/5-year/

I think "mixing things up" and not explicitly explaining it, is inherently misleading. Private companies that are regulated, still have to follow regulations. There is apparently no applicable annuity marketing regulation.

6% simple interest is attractive to some people, so it should be explicit.
Last edited by aXlniM5gE9rBs on Tue Nov 22, 2022 12:19 pm, edited 2 times in total.
GaryA505
Posts: 1722
Joined: Wed Feb 08, 2017 2:59 pm
Location: New Mexico

Re: Beware - Simple Interest - Ibexis

Post by GaryA505 »

Stinky wrote: Tue Nov 22, 2022 10:02 am
aXlniM5gE9rBs wrote: Thu Nov 17, 2022 1:57 pm So, the problem with Ibexis appears to be its use of the phrase "simple" interest.

They use it in their marketing material. Click the rate sheet.

https://ibexis.com/multi-year-guaranteed-annuities

And, the contract itself. That I received, but won't bother posting.

Yet, I still think it is misleading. Nearly all fixed-income pays "simple interest," that is then compounded. (Excluding zero coupon, annual coupon payments, etc.). Bonds pay interest, that the owner then compounds, elsewhere. Nowhere do I see, that Ibexis specifies interest does NOT compound. I suppose a person could withdraw the interest each year.

So, be sure to read your contracts, and ask questions. If you own something, make sure the interest increases a little bit each day. For examle, if your contract pays 4% annually, it should increase by a bit more than 1% after 3 months, due to compounding. It should start accumulating ~ .04/365 on day one, and increase a bit each day.

Would be curious if anyone else has seen "simple" interest used by other companies.

Good luck to everyone who tries to be responsible. From my perspective, annuities should be required to list both the Interest Rate and Annual Yield, just like banks, in big red print right on the term sheet.
I’ve been in contact with Jason, who is associated with The Annuity Store, which lists the Ibexis 5 year product as its “best fixed annuity rate” at 6%.

Of course, as noted upthread, the 6% rate is based on “simple” interest. The rate comparable to the presentation on other websites is 5.39% - still a strong rate for a 5 year product, but not the “best”.

Jason says he always stresses the “simple” nature of the interest when he talks to a potential client. He finds the product useful for folks who want to take a monthly distribution after the first policy year.

I’ve pointed out to Jason that the presentation of the Ibexis 5 year product is inconsistent with the presentation of other products on his website. But as of today, the presentation remains unchanged.

I think that the presentation of the Ibexis 5 year product on The Annuity Store website is at best inconsistent with other products, and is at worst blatantly misleading. But it’s a private website, and it can choose to display products however it chooses.
I would suggest that presenting information that could possibly be misleading is bad for business.

I'll suggest that if "Jason" is reading this, he should take note.
Get most of it right and don't make any big mistakes. Other things being equal (or close enough), simpler is better.
aXlniM5gE9rBs
Posts: 34
Joined: Fri Jul 22, 2022 7:28 am

Ibexis - simple interest calculation

Post by aXlniM5gE9rBs »

For anyone interested, here is the sample Ibexis contract.

https://drive.google.com/file/d/11IMP3q ... sp=sharing

With other annuity contracts I have seen, there is usually a definition for Accumulated Value = Value at Beginning of the Day + (Daily Interest Rate * Value at Beginning of the Day). To show that interest is compounded just a little bit, every day. It has to be that way, and that clear, because this is the legal contract.

Ibexis page 21 defines "Fixed Option Account Value," to include "simple interest credited," based on the initial premium, minus withdrawals, etc. I still don't think it is explicit.

Anyway, with this contract, it would only make financial sense to withdraw at least the interest each year. Correct? Because the simple interest earned, is only based on the original premium and withdrawals. Interest is not paid on the accumulated interest.

So, that (likely) negates the potential tax-deferred benefit, because the interest is taxable in a non-qualified MYGA. So is taxable, when withdrawn each year.
GaryA505
Posts: 1722
Joined: Wed Feb 08, 2017 2:59 pm
Location: New Mexico

Re: Ibexis - simple interest calculation

Post by GaryA505 »

aXlniM5gE9rBs wrote: Tue Nov 22, 2022 6:32 pm For anyone interested, here is the sample Ibexis contract.

https://drive.google.com/file/d/11IMP3q ... sp=sharing

With other annuity contracts I have seen, there is usually a definition for Accumulated Value = Value at Beginning of the Day + (Daily Interest Rate * Value at Beginning of the Day). To show that interest is compounded just a little bit, every day. It has to be that way, and that clear, because this is the legal contract.

Ibexis page 21 defines "Fixed Option Account Value," to include "simple interest credited," based on the initial premium, minus withdrawals, etc. I still don't think it is explicit.

Anyway, with this contract, it would only make financial sense to withdraw at least the interest each year. Correct? Because the simple interest earned, is only based on the original premium and withdrawals. Interest is not paid on the accumulated interest.

So, that (likely) negates the potential tax-deferred benefit, because the interest is taxable in a non-qualified MYGA. So is taxable, when withdrawn each year.
I believe MYGA withdrawals are always LIFO (last in, first out) so the interest will always be taxed first on a withdrawal.
Get most of it right and don't make any big mistakes. Other things being equal (or close enough), simpler is better.
User avatar
Topic Author
Stinky
Posts: 10916
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Ibexis - simple interest calculation

Post by Stinky »

aXlniM5gE9rBs wrote: Tue Nov 22, 2022 6:32 pm For anyone interested, here is the sample Ibexis contract.

https://drive.google.com/file/d/11IMP3q ... sp=sharing

With other annuity contracts I have seen, there is usually a definition for Accumulated Value = Value at Beginning of the Day + (Daily Interest Rate * Value at Beginning of the Day). To show that interest is compounded just a little bit, every day. It has to be that way, and that clear, because this is the legal contract.

Ibexis page 21 defines "Fixed Option Account Value," to include "simple interest credited," based on the initial premium, minus withdrawals, etc. I still don't think it is explicit.

Anyway, with this contract, it would only make financial sense to withdraw at least the interest each year. Correct? Because the simple interest earned, is only based on the original premium and withdrawals. Interest is not paid on the accumulated interest.

So, that (likely) negates the potential tax-deferred benefit, because the interest is taxable in a non-qualified MYGA. So is taxable, when withdrawn each year.
I think you’ve found the ideal use case for this annuity.

If you bought a $100k 5 year contract at 6%, you could withdraw $6,000 of interest per year, and then take down the $100k principal at the end of 5 years

By making the annual withdrawal, you would have taxable income every year. So the potential benefit of tax deferral would be lost with this strategy.

But that $6,000 annual interest draw is the highest that I know of from any MYGA available today.
Retired life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
Grover1318
Posts: 5
Joined: Sat Jan 26, 2019 1:35 pm

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

Post by Grover1318 »

I'm strongly considering the Ibexis 7-year MYGA, but I am concerned about the safety of an AM Best A- rating. Since my state guaranty agency protection limit is $250k, I would like to believe that I can sleep well knowing that I will not lose my initial investment. Does anyone else share my feelings?
Thanks,
Grover
User avatar
Topic Author
Stinky
Posts: 10916
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

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

Post by Stinky »

Grover1318 wrote: Wed Nov 23, 2022 12:34 pm I'm strongly considering the Ibexis 7-year MYGA, but I am concerned about the safety of an AM Best A- rating. Since my state guaranty agency protection limit is $250k, I would like to believe that I can sleep well knowing that I will not lose my initial investment. Does anyone else share my feelings?
Thanks,
Grover
Not only does Ibexis have an A- rating, but they have been operating under their current business plan (that is, selling MYGAs) for less than a year. Note that their website shows that the A- rating was granted in April 2022, and I believe that the rating date preceded the start of MYGA marketing.

Personally, I’d prefer a little more seasoning on the company, its management, and its systems before I commit to a 7 year contract.

Aspida has a similar profile - that is, a new entrant into the MYGA space in 2022, with an A- rating. I did buy a MYGA from them a few months ago, but it was a 3 year contract. I didn’t feel comfortable going longer at this point.
Retired life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
Grover1318
Posts: 5
Joined: Sat Jan 26, 2019 1:35 pm

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

Post by Grover1318 »

Stinky wrote: Wed Nov 23, 2022 12:48 pm
Grover1318 wrote: Wed Nov 23, 2022 12:34 pm I'm strongly considering the Ibexis 7-year MYGA, but I am concerned about the safety of an AM Best A- rating. Since my state guaranty agency protection limit is $250k, I would like to believe that I can sleep well knowing that I will not lose my initial investment. Does anyone else share my feelings?
Thanks,
Grover
Not only does Ibexis have an A- rating, but they have been operating under their current business plan (that is, selling MYGAs) for less than a year. Note that their website shows that the A- rating was granted in April 2022, and I believe that the rating date preceded the start of MYGA marketing.

Personally, I’d prefer a little more seasoning on the company, its management, and its systems before I commit to a 7 year contract.

Aspida has a similar profile - that is, a new entrant into the MYGA space in 2022, with an A- rating. I did buy a MYGA from them a few months ago, but it was a 3 year contract. I didn’t feel comfortable going longer at this point.
Thank you, Stinky. I had a hunch that this product would be too good to be true.

I did a bit more digging and noticed that Ibexis is a subsidiary of Cordillera Holdings LLP, which was founded in 2020. Much too recent for my liking.
chazas
Posts: 657
Joined: Wed Nov 01, 2017 1:22 pm
Location: NoVa

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

Post by chazas »

chazas wrote: Mon Nov 07, 2022 10:34 am
chazas wrote: Fri Nov 04, 2022 12:27 pm Just one data point for folks thinking about Canvas. I'm going to 1035 exchange some inherited annuities into MYGAs, as discussed on another thread. I decided I was perfectly happy with a BB+ rated insurer so tried to work with Canvas. I couldn't even register for the process without an error. I spent 15 minutes on the phone with a mumbling tech support guy who couldn't figure it out and said he'd submit an IT ticket. I told him to forget it. My experience - if the initial interaction is that bad with a company, it rarely gets better.
Turns out there was a glitch in their registration process, which they fixed. But the real problem was that their products aren't available in my state, which is the message I got once the glitch was fixed.
Memorializing this here for anyone looking for information in the future. Turns out it's really, really hard to do a 1035 exchange for an inherited annuity.

Stan The Annuity Man said he basically punts all this business to another broker, because so few insurers will issue policies under these circumstances. He said NY Life was the best option. I was looking for MYGAs that mature within the required 5-year period. The referred broker said NY Life "didn't have a product" (what?) and suggested a MassMutual company instead, with a really low rate, and said they would require me to take RMDs. I re-read the statue and the applicable revenue ruling and so far as I can tell that is just not correct, but no one seemed interested in taking it further.

I was also talking to Blueprint. They spent a ton of time going back and forth with several insurers. They have finally placed me at Oceanview - OK rate and so far they seem to be giving me the products I want. I'm in the application process. We'll see how it turns out.

If this doesn't work out I've about exhausted my appetite for exploring this, I'll just leave the legacy policies where they are at 3% until I decide to take the income into account.
User avatar
indexfundfan
Posts: 3657
Joined: Tue Feb 20, 2007 11:21 am
Contact:

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

Post by indexfundfan »

Does anyone know if there are any regulatory guidelines as to how soon a withdrawal request must be completed? If there are none, it seems like the consumers are at the mercy of the insurers to process the request. The insurers could drag their feet, hold on to your funds and take weeks to process any request.
My signature has been deleted.
User avatar
Topic Author
Stinky
Posts: 10916
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

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

Post by Stinky »

indexfundfan wrote: Thu Nov 24, 2022 8:26 am Does anyone know if there are any regulatory guidelines as to how soon a withdrawal request must be completed? If there are none, it seems like the consumers are at the mercy of the insurers to process the request. The insurers could drag their feet, hold on to your funds and take weeks to process any request.
I don’t know of any regulatory guidelines for processing withdrawals.

If a request took too long, a consumer could make a formal complaint to the company, copying the insurance departments of both the consumer’s home state and the state of incorporation of the life insurer.

My limited experience with MYGA withdrawals is that they are handled promptly - within a week in all cases. So far so good.
Retired life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
aXlniM5gE9rBs
Posts: 34
Joined: Fri Jul 22, 2022 7:28 am

Colorado Bankers Life - state guarantees are not insurance

Post by aXlniM5gE9rBs »

Grover1318 wrote: Wed Nov 23, 2022 12:34 pm Since my state guaranty agency protection limit is $250k, I would like to believe that I can sleep well knowing that I will not lose my initial investment.
Just want to put this out there, state associations are not insurance, and should not be conflated with the FDIC / NCUA.

When an insurance company is in financial trouble, it can take years to reach the insolvency phase, where the guarantees are implemented.

In a current case, Colorado Bankers Life, annuity owners are no longer able to withdraw at the end of the guarantee period. And, the maturity date can be decades in the future. This is how Colorado Bankers Life describes the current suspension of withdrawals.
14) My annuity matures soon. How are matured annuities hand ed?
Annuities that mature will be paid. Please be aware that there is a difference between Maturity Date and end of the surrender charge period. The Maturity Date is the contract anniversary date in the year following the date that the Annuitant reaches maturity age, typically age 95. This is different from the end of the surrender charge period. The surrender charge period is the time frame during which the owner cannot withdraw funds without incurring a surrender charge. The surrender charge period is typically 3 to 7 years after you purchase the annuity. The end of the surrender charge period does not mean that the annuity has matured. Check your policy for specific contract information.
https://cblife.com/
aXlniM5gE9rBs
Posts: 34
Joined: Fri Jul 22, 2022 7:28 am

Re: Colorado Bankers Life - state guarantees are not insurance

Post by aXlniM5gE9rBs »

Grover1318 wrote: Wed Nov 23, 2022 12:34 pm Since my state guaranty agency protection limit is $250k, I would like to believe that I can sleep well knowing that I will not lose my initial investment.
Just want to put this out there, state associations are not insurance, and should not be conflated with the FDIC / NCUA.

When an insurance company is in financial trouble, it can take years to reach the insolvency phase, where the guarantees are implemented.

In a current case, Colorado Bankers Life, annuity owners are no longer able to withdraw at the end of the guarantee period. And, the maturity date can be decades in the future. This is how Colorado Bankers Life describes the current suspension of withdrawals.
14) My annuity matures soon. How are matured annuities hand ed?
Annuities that mature will be paid. Please be aware that there is a difference between Maturity Date and end of the surrender charge period. The Maturity Date is the contract anniversary date in the year following the date that the Annuitant reaches maturity age, typically age 95. This is different from the end of the surrender charge period. The surrender charge period is the time frame during which the owner cannot withdraw funds without incurring a surrender charge. The surrender charge period is typically 3 to 7 years after you purchase the annuity. The end of the surrender charge period does not mean that the annuity has matured. Check your policy for specific contract information.
https://cblife.com/

And, the minimum rate after the surrender charge period, can be 1% or more or less, listed in the annuity contract.
User avatar
indexfundfan
Posts: 3657
Joined: Tue Feb 20, 2007 11:21 am
Contact:

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

Post by indexfundfan »

Stinky wrote: Thu Nov 24, 2022 11:11 am
indexfundfan wrote: Thu Nov 24, 2022 8:26 am Does anyone know if there are any regulatory guidelines as to how soon a withdrawal request must be completed? If there are none, it seems like the consumers are at the mercy of the insurers to process the request. The insurers could drag their feet, hold on to your funds and take weeks to process any request.
I don’t know of any regulatory guidelines for processing withdrawals.

If a request took too long, a consumer could make a formal complaint to the company, copying the insurance departments of both the consumer’s home state and the state of incorporation of the life insurer.

My limited experience with MYGA withdrawals is that they are handled promptly - within a week in all cases. So far so good.
Thanks. My request with the Americo withdrawal has now entered the fourth week. What they told me the last time I contacted them was that they need 15 business days to process requests. This is long compared to the other companies I encountered. It could be that with the much higher market interest rates now, it is advantageous for Americo to hold on to funds which they pay much lower interest rate for as long as possible.

As an additional data point, I had also made a withdrawal from Americo in July. That one took two weeks.

I plan to submit a complaint if I still do not receive the funds on Monday.
My signature has been deleted.
GaryA505
Posts: 1722
Joined: Wed Feb 08, 2017 2:59 pm
Location: New Mexico

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

Post by GaryA505 »

Is it possible to get a 2-yr MYGA ASAP before the end of 2022, cash it out at the end of the 2-yr surrender period, and receive the interest income by the end of Dec 2024 so it counts for tax year 2024? Seems like these insurance companies are kind of slow, so that's why I'm asking.

I'm asking this question for tax planning reasons too complicated to explain here, so please don't ask why I would want to do this. Trust me. :)
Get most of it right and don't make any big mistakes. Other things being equal (or close enough), simpler is better.
User avatar
Topic Author
Stinky
Posts: 10916
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

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

Post by Stinky »

GaryA505 wrote: Sat Nov 26, 2022 1:24 pm Is it possible to get a 2-yr MYGA ASAP before the end of 2022, cash it out at the end of the 2-yr surrender period, and receive the interest income by the end of Dec 2024 so it counts for tax year 2024? Seems like these insurance companies are kind of slow, so that's why I'm asking.

I'm asking this question for tax planning reasons too complicated to explain here, so please don't ask why I would want to do this. Trust me. :)
I would absolutely think you could get a taxable MYGA issued before 12/31/22. If you do that and request that the annuity be surrendered at the end of the initial guarantee period, the interest should be reported as of the 2 year anniversary date, which will be within 2024.

If you choose to send a check to fund the policy, I’d suggest using overnight delivery. If possible, it would be faster to use ACH to fund the contract.

Check with your agent on Monday to confirm my answer.
Retired life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
GaryA505
Posts: 1722
Joined: Wed Feb 08, 2017 2:59 pm
Location: New Mexico

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

Post by GaryA505 »

Stinky wrote: Sat Nov 26, 2022 1:36 pm
GaryA505 wrote: Sat Nov 26, 2022 1:24 pm Is it possible to get a 2-yr MYGA ASAP before the end of 2022, cash it out at the end of the 2-yr surrender period, and receive the interest income by the end of Dec 2024 so it counts for tax year 2024? Seems like these insurance companies are kind of slow, so that's why I'm asking.

I'm asking this question for tax planning reasons too complicated to explain here, so please don't ask why I would want to do this. Trust me. :)
I would absolutely think you could get a taxable MYGA issued before 12/31/22. If you do that and request that the annuity be surrendered at the end of the initial guarantee period, the interest should be reported as of the 2 year anniversary date, which will be within 2024.

If you choose to send a check to fund the policy, I’d suggest using overnight delivery. If possible, it would be faster to use ACH to fund the contract.

Check with your agent on Monday to confirm my answer.
Ok, since you gave such a great answer I'll tell you why I asked. In 2024 I will be fully retired and my federal income should be 0. I will have one dependents that I can get the $2000 CTC (child tax credit) for and one that I can get the $500 CTC for, but these are not refundable credits so if I have no taxes I can't get them. Note that these CTC for 2021 were refundable, but revert to a nonrefundable credits for 2022. So, if I have a MYGA that pays me out $2500 interest in 2024, this interest will be totally tax free.
Get most of it right and don't make any big mistakes. Other things being equal (or close enough), simpler is better.
User avatar
indexfundfan
Posts: 3657
Joined: Tue Feb 20, 2007 11:21 am
Contact:

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

Post by indexfundfan »

GaryA505 wrote: Sat Nov 26, 2022 1:24 pm Is it possible to get a 2-yr MYGA ASAP before the end of 2022, cash it out at the end of the 2-yr surrender period, and receive the interest income by the end of Dec 2024 so it counts for tax year 2024? Seems like these insurance companies are kind of slow, so that's why I'm asking.

I'm asking this question for tax planning reasons too complicated to explain here, so please don't ask why I would want to do this. Trust me. :)
Hopefully you can pick an insurer which will fund your policy quickly.

Americo offers 2-year MYGAs but they are kind of slow on the withdrawal side. I submitted a partial withdrawal on 11/1 and it still has not been processed. I know Canvas and Gainbridge funds quickly but I don't think they offer 2-year terms.
My signature has been deleted.
User avatar
Topic Author
Stinky
Posts: 10916
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

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

Post by Stinky »

GaryA505 wrote: Sat Nov 26, 2022 5:13 pm
So, if I have a MYGA that pays me out $2500 interest in 2024, this interest will be totally tax free.
I like tax free interest!

Let us know if this works out for you, and which carrier you go with.

EDIT - Aspida issued a policy very quickly for me back in August. And mine was an IRA, which is more complex than a taxable sale.
Retired life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
Post Reply