Purchasing MYGAs (multi year guaranteed annuities) - mega thread

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

Post by MrM1 »

Good Afternoon (or whatever it is when you see this)

First Post (I know I will have some more)

But I have an inheritance that needs to be dealt with quickly. I am 61 so my time horizon feels dangerously close to retirement to be putting all the funds in a 3 Fund Portfolio of ETFs. Especially with the Shiller PE up near 35. Just too much risk right for my Lump Sum and constitution. But I need to do something with these funds as I cannot increase my taxable income for the next 4 years with growth, and a MYGA seems like at least a good option. My location is in Florida.

Thanks @Stinky for your work in this thread and the excellent Zoom Meeting last week.

I have also read the first few pages of this thread, and the last 3 or 4.

Is it still the general consensus that ...
  • Gainbrigde
    Canvas
    and Oceanview
are the way to go?

Is it best to go direct to the associated web sites or use a reseller / agent?

Process seems to be pretty straight forward. I used to sell insurance and annuities back in 2003-04. But I am sure much has changed.

I am thinking ...
  • A 5 year at Gainbridge
    And a 5 or 7 year at Canvas
    But maybe a ladder is not the best idea IF I do not need the funds any time soon. Thoughts?
What else besides these has bubbled up to the top from this thread?

Thanks for the responses, I probably need to move on an idea in the next week or so before rates change.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

MrM1 wrote: Mon Jun 10, 2024 7:31 pm Good Afternoon (or whatever it is when you see this)

First Post (I know I will have some more)

But I have an inheritance that needs to be dealt with quickly. I am 61 so my time horizon feels dangerously close to retirement to be putting all the funds in a 3 Fund Portfolio of ETFs. Especially with the Shiller PE up near 35. Just too much risk right for my Lump Sum and constitution. But I need to do something with these funds as I cannot increase my taxable income for the next 4 years with growth, and a MYGA seems like at least a good option. My location is in Florida.

Thanks @Stinky for your work in this thread and the excellent Zoom Meeting last week.

I have also read the first few pages of this thread, and the last 3 or 4.

Is it still the general consensus that ...
  • Gainbrigde
    Canvas
    and Oceanview
are the way to go?

Is it best to go direct to the associated web sites or use a reseller / agent?

Process seems to be pretty straight forward. I used to sell insurance and annuities back in 2003-04. But I am sure much has changed.

I am thinking ...
  • A 5 year at Gainbridge
    And a 5 or 7 year at Canvas
    But maybe a ladder is not the best idea IF I do not need the funds any time soon. Thoughts?
What else besides these has bubbled up to the top from this thread?

Thanks for the responses, I probably need to move on an idea in the next week or so before rates change.
Welcome to the Forum! I’m glad that you found my presentation to be useful.

MYGAs are an excellent vehicle if you want to earn an attractive rate of interest but defer reporting of taxable income.

I don’t think there’s any consensus as to the “best” companies. Gainbridge does give excellent customer service and has good rates, and Canvas/Puritan does have high rates. Oceanview had market leading rates for a while late last year, but they’ve dropped back a bit. Also, as I’ve said upthread, my personal choice is to purchase for no longer than 3 years from a company rated B++, and to not purchase from any company rated B+ or lower.

Aspida has some pretty strong rates right now for a company rated A-

As to who to purchase from - Gainbridge and Canvas sell directly to consumers. Most all other carriers sell through agents like Blueprint Income, Stan the Annuity Man, Annuity Advantage, and Immediateannuities.com, and a consumer can’t go directly to the company.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by jhblegend »

MrM1 wrote: Mon Jun 10, 2024 7:31 pm Is it best to go direct to the associated web sites or use a reseller / agent?

Process seems to be pretty straight forward. I used to sell insurance and annuities back in 2003-04. But I am sure much has changed.
Given you have sold insurance products in the past, you are likely knowledgeable enough to use the associated websites as opposed to an agent, as higher rates are typically available that way (I fell into this bucket, purchased from Gainbridge.) But if that is not your priority, an agent could be more useful to you.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by MrM1 »

jhblegend wrote: Tue Jun 11, 2024 2:08 pm Given you have sold insurance products in the past, you are likely knowledgeable enough to use the associated websites as opposed to an agent, as higher rates are typically available that way (I fell into this bucket, purchased from Gainbridge.) But if that is not your priority, an agent could be more useful to you.
Thanks all for the Responses.

@jhblegend are you saying, if I do call and us an agent at Gainbridge or Canvas, I would be charged a fee or have a lower rate.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

MrM1 wrote: Wed Jun 12, 2024 1:30 pm
jhblegend wrote: Tue Jun 11, 2024 2:08 pm Given you have sold insurance products in the past, you are likely knowledgeable enough to use the associated websites as opposed to an agent, as higher rates are typically available that way (I fell into this bucket, purchased from Gainbridge.) But if that is not your priority, an agent could be more useful to you.
Thanks all for the Responses.

@jhblegend are you saying, if I do call and us an agent at Gainbridge or Canvas, I would be charged a fee or have a lower rate.
To my knowledge, the only company that has more than one MYGA interest rate scale is Gainbridge. They appear to pay a higher interest rate if you buy directly from them than if you buy through a third party (like Blueprint Income).

Beyond that, I believe that other MYGA carriers pay the same interest rates whether you purchase on the web or talk to an agent on the phone. Except for “direct sellers” like Gainbridge and Canvas, you’ll need to use a third party agent to purchase a MYGA. There is no fee for purchasing a MYGA.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by LadyGeek »

Stinky's meeting of June 4, 2024 is now on YouTube. See: Bogleheads® Chapter Series – All about annuities

The slides and anonymized meeting chat have been uploaded to the Bogle Center's SharePoint site.

Note: When sharing links, only use the links shown in the blog or YouTube channel. When clicking on those links, Microsoft changes the link and you can't use it again. Don't blame me. That's how SharePoint works.

Slides: https://boglecenter.sharepoint.com/:b:/ ... Q?e=t3PIYa <-- will be different than what you see in your web browser.

Code: Select all

https://boglecenter.sharepoint.com/:b:/s/Bogleheads/EfpxR0zAlY9LnTk21XFGu5cBDs24JFefHtKr_rdgkl8rQQ?e=t3PIYa
Anonymized chat: https://boglecenter.sharepoint.com/:b:/ ... g?e=5GnYq9 <-- will be different than what you see in your web browser.

Code: Select all

https://boglecenter.sharepoint.com/:b:/s/Bogleheads/Eb0GvRYG_pNKsF90BwNNfuMBS_0rRYjZtRiGl0KOq_X2og?e=5GnYq9
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Buzz1964 »

I am turning 60 years old this August. I have built out a 6 year MYGA ladder with an average ROI of +5%. Each MYGA will mature in August for 6 years. I have been evaluating the option of purchasing a DIA (deferred income annuity) for years 7 through 11. I would use tax deferred funds from my 401K IRA rollover. I can fund a 7 year DIA which would start a pay out for a 5 year period certain of $11,331.00 per month. The payout would end in 5 years. Total payout would be $679,860. The payment would be taxable.

This would zero out my tax deferred funds prior to RMD's. I would only have my wife's tax deferred funds to worry about RMD's. I could also use her tax deferred funds to fund a 11 year DIA to cover years 12-17. This would cover all are base floor needs + some when you add SSI at 70 and a small pension. Additionally this 11 year or 17 year ladder would allow our remaining portfolio to double or triple in 17 years. It is invested in the VTI and VUG. Any thoughts?.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

Buzz1964 wrote: Wed Jun 12, 2024 9:40 pm I am turning 60 years old this August. I have built out a 6 year MYGA ladder with an average ROI of +5%. Each MYGA will mature in August for 6 years. I have been evaluating the option of purchasing a DIA (deferred income annuity) for years 7 through 11. I would use tax deferred funds from my 401K IRA rollover. I can fund a 7 year DIA which would start a pay out for a 5 year period certain of $11,331.00 per month. The payout would end in 5 years. Total payout would be $679,860. The payment would be taxable.

This would zero out my tax deferred funds prior to RMD's. I would only have my wife's tax deferred funds to worry about RMD's. I could also use her tax deferred funds to fund a 11 year DIA to cover years 12-17. This would cover all are base floor needs + some when you add SSI at 70 and a small pension. Additionally this 11 year or 17 year ladder would allow our remaining portfolio to double or triple in 17 years. It is invested in the VTI and VUG. Any thoughts?.
Welcome to the Forum!

I personally like your MYGA ladder. Presuming that you've kept your purchases within your state guaranty fund limits and have used solid companies, I think that a 5+% return on these funds is excellent. Do you have plans for what you'll do with the funds in the MYGAs as their get to the end of their 1-6 year terms?

Presuming that you want to "lock in" your income for years 7-11, I think that a term-certain DIA would be fine. But if you do that with just one DIA, then I expect that your DIA will be well above your state guaranty fund limits. So I would restrict that purchase to an A++ or maybe A+ company, or I would break it up into two or more DIAs.

Another idea for your years 7-11 would be to buy MYGAs that would mature for $11,331 X 12 = $135,972 (or so) for each of years 7-10. You might get a lower all-in purchase price than the DIA route.

Finally, I'd suggest that you be aware of the informal limitation of 50% of total financial assets being invested in annuities. You don't mention the size of your taxable account, so you may be just fine on this score.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by MrM1 »

@Stinky

OK so I am at the purchase point for Canvas and Gainbridge

Plan to do a
- 3 year at Canvas (B++) for $50k
- 4 year at Gainbridge (A-) for $75k

These funds are coming from Inheritance funds. So I am putting them into these MYGAs for the Tax deferred option and interest rate.

Do you think those amounts are too high for companies I have never dealt with before? Should I start lower? I do not need the funds until each would mature. So no worries there. Still working and putting in $1700 monthly to my 403b for 5 more years.
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Re: Purchasing MYGAs - Blueprint Income vs. Gainbridge vs. Canvas

Post by WhyNotUs »

Stinky wrote: Thu Dec 31, 2020 10:11 am I’ve built a ladder of MYGAs from 2 years to 8 years. They comprise about 10% of my invested assets and about one-half of my fixed income allocation. I have a view that interest rates will be low for a long time, and I think that a 3.50% interest rate from Canvas on a 7 year MYGA is very attractive.
Bold call, I probably would have guessed the same thing based on federal debt load.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

MrM1 wrote: Thu Jun 13, 2024 2:20 pm @Stinky

OK so I am at the purchase point for Canvas and Gainbridge

Plan to do a
- 3 year at Canvas (B++) for $50k
- 4 year at Gainbridge (A-) for $75k

These funds are coming from Inheritance funds. So I am putting them into these MYGAs for the Tax deferred option and interest rate.

Do you think those amounts are too high for companies I have never dealt with before? Should I start lower? I do not need the funds until each would mature. So no worries there. Still working and putting in $1700 monthly to my 403b for 5 more years.
I’d feel comfortable with this.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by MrM1 »

Or is there a "Red Flag" if I were to do it all at Gainbridge in a 4 year and year 6? Or is that too many eggs in 1 basket.

I just realized I can't take the tax hit for at least 4 years. And I if understand correctly, it's not recommended by those here to take a B++ for more than 3 years
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

MrM1 wrote: Thu Jun 13, 2024 3:17 pm Or is there a "Red Flag" if I were to do it all at Gainbridge in a 4 year and year 6? Or is that too many eggs in 1 basket.

I just realized I can't take the tax hit for at least 4 years. And I if understand correctly, it's not recommended by those here to take a B++ for more than 3 years
That would also be fine with me. I presume that the total of the two MYGAs with Gainbridge would be $125k, which I expect
Is well below your state guaranty fund limit.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by MrM1 »

Stinky wrote: Thu Jun 13, 2024 3:24 pm That would also be fine with me. I presume that the total of the two MYGAs with Gainbridge would be $125k, which I expect
Is well below your state guaranty fund limit.
Yes that would be correct. Thanks for the response.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by swayswift »

@Stinky,

Would you recommend MYGA for California. I read somewhere that CA is not very good for this. I went through your presentation and loved it. The attractive rates of MYGAs are great but they do come with extra risk of losing principal compared to FDIC options. Its a shame that federal govt does not have any law on cases when companies go under to protect the consumer right away. Would be interested to know what companies would you recommend for CA, I saw a 250K limit for protection but want to play it super safe with almost 100% principal protection.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

swayswift wrote: Fri Jun 14, 2024 2:38 am @Stinky,

Would you recommend MYGA for California. I read somewhere that CA is not very good for this. I went through your presentation and loved it. The attractive rates of MYGAs are great but they do come with extra risk of losing principal compared to FDIC options. Its a shame that federal govt does not have any law on cases when companies go under to protect the consumer right away. Would be interested to know what companies would you recommend for CA, I saw a 250K limit for protection but want to play it super safe with almost 100% principal protection.
In my view, the chance of a company rated A+ or A++ by AM Best becoming unable to fully pay its claims during the timeframe of a MYGA (2-10 years) is very low.

Buying from a company with those high ratings could make sense for a risk averse California resident.
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Post by swayswift »

Thanks @Stinky, and how do i find these companies, anyone your recommend for CA that meets this bar ?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

swayswift wrote: Fri Jun 14, 2024 4:38 pm Thanks @Stinky, and how do i find these companies, anyone your recommend for CA that meets this bar ?
My favorite site for learning about MYGA products is Blueprint Income, because their product information is deeper than other sites. Here’s a link to the “fixed annuity” page, which is for MYGAs. Just put in your state and amount, and then you can further select (like by minimum rating) on subsequent pages.

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

Post back if you have difficulty with the site.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by swayswift »

Thanks, I see 5.45% for A++ for a 5 year and a 7 year term Reliance Standard. Is this a good one ?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

swayswift wrote: Sat Jun 15, 2024 2:22 am Thanks, I see 5.45% for A++ for a 5 year and a 7 year term Reliance Standard. Is this a good one ?
I think that would be an excellent choice.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by GuyInFL »

Receive an email from Aspida (BlueprintIncome.com) saying rates are decreasing on 18 June.
They told me your rate is locked in when you apply.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by TheNightsToCome »

GuyInFL wrote: Sat Jun 15, 2024 6:48 am Receive an email from Aspida (BlueprintIncome.com) saying rates are decreasing on 18 June.
They told me your rate is locked in when you apply.
I just purchased their 3-yr MYGA. Would have gone 5-yr if rating was A instead of A-.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

GuyInFL wrote: Sat Jun 15, 2024 6:48 am Receive an email from Aspida (BlueprintIncome.com) saying rates are decreasing on 18 June.
They told me your rate is locked in when you apply.
With the recent downtrend in market interest rates, I expect MYGA rates to follow.

And yes, rates are locked when you apply, so long as you fund within their stated timeframes.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by bogles the mind »

What is the advantage of a MYGA over a say 20 or 30 year Treasury Bond. Also, is the total tax due upon maturity with a MYGA?
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Post by tj »

bogles the mind wrote: Sat Jun 15, 2024 8:57 am What is the advantage of a MYGA over a say 20 or 30 year Treasury Bond. Also, is the total tax due upon maturity with a MYGA?
No pre 59.5 penalty with the bonds. No state taxes with the bonds.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by TheNightsToCome »

bogles the mind wrote: Sat Jun 15, 2024 8:57 am What is the advantage of a MYGA over a say 20 or 30 year Treasury Bond. Also, is the total tax due upon maturity with a MYGA?
MYGAs offer higher rates and tax deferral over the life of the contracts. Taxes on interest are due on receipt, but you'll have the option to roll into another MYGA at maturity if desired.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

bogles the mind wrote: Sat Jun 15, 2024 8:57 am What is the advantage of a MYGA over a say 20 or 30 year Treasury Bond. Also, is the total tax due upon maturity with a MYGA?
A MYGA is similar to a Treasury in that the principal value is available without surrender charge or market value adjustment at some future date. Other than that, MYGAs and Treasuries are two entirely different instruments. Advantages of MYGAs include -
—- MYGAs provide deferral of taxable interest earned
—- MYGAs usually pay higher interest rates than comparable Treasuries.

However, note that Treasuries are backed by the Feds, while MYGAs are backed by state guaranty funds. Treasuries are sellable at any time at market value, while MYGAs have surrender charges and (usually punitive) market value adjustments. Treasuries are available up to 30 year maturities, while MYGAs generally have a maximum interest guarantee period of 10 years. As noted above, MYGA interest is subject to a 10% additional Federal tax penalty if withdrawn before age 59.5.

To your second question - At the end of the initial guarantee period of a taxable MYGA, you can receive the total principal and accumulated interest, which will be taxable. Alternatively, you can re-up for a new guarantee period with your current insurer of do a 1035 exchange to a new insurer, both of which will continue the deferral of the reporting of taxable income.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by bogles the mind »

Stinky wrote: Sat Jun 15, 2024 12:37 pm
bogles the mind wrote: Sat Jun 15, 2024 8:57 am What is the advantage of a MYGA over a say 20 or 30 year Treasury Bond. Also, is the total tax due upon maturity with a MYGA?
A MYGA is similar to a Treasury in that the principal value is available without surrender charge or market value adjustment at some future date. Other than that, MYGAs and Treasuries are two entirely different instruments. Advantages of MYGAs include -
—- MYGAs provide deferral of taxable interest earned
—- MYGAs usually pay higher interest rates than comparable Treasuries.

However, note that Treasuries are backed by the Feds, while MYGAs are backed by state guaranty funds. Treasuries are sellable at any time at market value, while MYGAs have surrender charges and (usually punitive) market value adjustments. Treasuries are available up to 30 year maturities, while MYGAs generally have a maximum interest guarantee period of 10 years. As noted above, MYGA interest is subject to a 10% additional Federal tax penalty if withdrawn before age 59.5.

To your second question - At the end of the initial guarantee period of a taxable MYGA, you can receive the total principal and accumulated interest, which will be taxable. Alternatively, you can re-up for a new guarantee period with your current insurer of do a 1035 exchange to a new insurer, both of which will continue the deferral of the reporting of taxable income.
Thanks for the info and great video.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by bogles the mind »

I assume if I prefer to not defer taxes, utilizing the up to10% yearly withdrawl option would effectively spread out taxes over the life of the annuity, just losing compound interest? I was thinking withdraw an amount equal to whatever the interest rate is every year.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

bogles the mind wrote: Sat Jun 15, 2024 3:18 pm I assume if I prefer to not defer taxes, utilizing the up to10% yearly withdrawl option would effectively spread out taxes over the life of the annuity, just losing compound interest? I was thinking withdraw an amount equal to whatever the interest rate is every year.
Yes, that’s right.

If you took out 10% each year, you’d be fully withdrawing the interest each year, plus slowly drawing down on the basis of the annuity.

If you just took out the interest each year, the basis would be untouched, and you’d just be not taking advantage of the compounding within the annuity (plus the potential tax deferral).
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by TheNightsToCome »

When a MYGA contract matures, how are the proceeds typically distributed? ACH transfer to bank? Paper check in FedEx envelope? Other?
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Post by TheNightsToCome »

American National and Athene are both rated "A," and both offer 5.45% for 5 years.

Does anyone have experience with these companies? Is the customer experience better at one than the other?
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

TheNightsToCome wrote: Sat Jun 15, 2024 5:31 pm When a MYGA contract matures, how are the proceeds typically distributed? ACH transfer to bank? Paper check in FedEx envelope? Other?
I’ve surrendered two taxable MYGAs. In both cases, the proceeds were ACH transferred to my bank.

Others may have had different experiences.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by indexfundfan »

TheNightsToCome wrote: Sat Jun 15, 2024 5:31 pm When a MYGA contract matures, how are the proceeds typically distributed? ACH transfer to bank? Paper check in FedEx envelope? Other?
Canvas sends the proceeds to you with a paper check through USPS. No other option is available.
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Post by 808 »

indexfundfan wrote: Sat Jun 15, 2024 7:30 pm
TheNightsToCome wrote: Sat Jun 15, 2024 5:31 pm When a MYGA contract matures, how are the proceeds typically distributed? ACH transfer to bank? Paper check in FedEx envelope? Other?
Canvas sends the proceeds to you with a paper check through USPS. No other option is available.
How long did it take for you to receive the paper check once you sent in the paperwork? I have a Canvas MYGA with its guarantee period ending in August.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by indexfundfan »

808 wrote: Sun Jun 16, 2024 3:30 am
indexfundfan wrote: Sat Jun 15, 2024 7:30 pm
TheNightsToCome wrote: Sat Jun 15, 2024 5:31 pm When a MYGA contract matures, how are the proceeds typically distributed? ACH transfer to bank? Paper check in FedEx envelope? Other?
Canvas sends the proceeds to you with a paper check through USPS. No other option is available.
How long did it take for you to receive the paper check once you sent in the paperwork? I have a Canvas MYGA with its guarantee period ending in August.
If I recall correctly, it's about two weeks from the end of the guarantee period. No interest earned during this period.
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bogles the mind
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by bogles the mind »

Looks like Pa. has a 2% insurance premium tax on annuities and life insurace upon purchase. Can anyone confirm this to be true? So a $2000 tax on a $100,000 MYGA?
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Stinky
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

bogles the mind wrote: Sun Jun 16, 2024 11:21 am Looks like Pa. has a 2% insurance premium tax on annuities and life insurace upon purchase. Can anyone confirm this to be true? So a $2000 tax on a $100,000 MYGA?
Here’s a reference on the application of premium taxes to annuities. Interestingly, Pennsylvania is not on the list.

https://www.immediateannuities.com/state-premium-tax/

Even in the relatively small number of states that tax annuities, they only levy a tax when “annuitization” happens - that is, when a periodic payment from the insurance company is purchased. That would apply to SPIAs and DIAs, and to MYGAs and other annuities when the payments are turned on.

So if you’re buying a MYGA for accumulation purposes, I don’t believe there would be a premium tax in any state. You can confirm this with your agent.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
bogles the mind
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by bogles the mind »

Stinky wrote: Sun Jun 16, 2024 12:14 pm
bogles the mind wrote: Sun Jun 16, 2024 11:21 am Looks like Pa. has a 2% insurance premium tax on annuities and life insurace upon purchase. Can anyone confirm this to be true? So a $2000 tax on a $100,000 MYGA?
Here’s a reference on the application of premium taxes to annuities. Interestingly, Pennsylvania is not on the list.

https://www.immediateannuities.com/state-premium-tax/

Even in the relatively small number of states that tax annuities, they only levy a tax when “annuitization” happens - that is, when a periodic payment from the insurance company is purchased. That would apply to SPIAs and DIAs, and to MYGAs and other annuities when the payments are turned on.

So if you’re buying a MYGA for accumulation purposes, I don’t believe there would be a premium tax in any state. You can confirm this with your agent.
Removing interest payments regularly shouldn't trigger that I would guess. I am trying to avoid lump some interest payment at the end to keep my tax liability as low as possible. Better for me to spread it across multiple years. I am not seeing the benefit of deferred tax on interest payments unless there is a mechanisms to spread them out. Maybe I'm looking at this wrong.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Skywalker10 »

Thank you Stinky for sharing your knowledge and perspectives on this forum and for your recent All About Annuities presentation which I caught on youtube. I have been learning about the various types annuities over the last three years and many of your perspectives are similar to others that I have heard. One of my favorite retirement podcasts, The Retirement and IRA Show, have been devoting some of their podcasts for the month of June to annuity education. They are retirement planners and do not push annuities. They also present a balanced and non-biased view similar to you.
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by Stinky »

Skywalker10 wrote: Sun Jun 16, 2024 5:54 pm Thank you Stinky for sharing your knowledge and perspectives on this forum and for your recent All About Annuities presentation which I caught on youtube. I have been learning about the various types annuities over the last three years and many of your perspectives are similar to others that I have heard.
Thank you for your kind words.
Retired life insurance company financial executive 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 Stinky »

bogles the mind wrote: Sun Jun 16, 2024 5:29 pm
Removing interest payments regularly shouldn't trigger that I would guess. I am trying to avoid lump some interest payment at the end to keep my tax liability as low as possible. Better for me to spread it across multiple years. I am not seeing the benefit of deferred tax on interest payments unless there is a mechanisms to spread them out. Maybe I'm looking at this wrong.
You're correct - withdrawing interest earned (or basis) will not generate a premium tax. As I understand it, a premium tax is generated only if a person "annuitizes" the policy; that is, converts the policy into a fixed stream of payments. And as I said above, premium taxes are assessed on annuities in only a few states.

Many people find that it makes sense to withdraw earnings from an annuity annually. Others find that it makes sense to defer receiving earnings and thereby defer reporting taxable income. To each his own.
Retired life insurance company financial executive 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 bogles the mind »

Stinky wrote: Sun Jun 16, 2024 6:01 pm
bogles the mind wrote: Sun Jun 16, 2024 5:29 pm
Removing interest payments regularly shouldn't trigger that I would guess. I am trying to avoid lump some interest payment at the end to keep my tax liability as low as possible. Better for me to spread it across multiple years. I am not seeing the benefit of deferred tax on interest payments unless there is a mechanisms to spread them out. Maybe I'm looking at this wrong.
You're correct - withdrawing interest earned (or basis) will not generate a premium tax. As I understand it, a premium tax is generated only if a person "annuitizes" the policy; that is, converts the policy into a fixed stream of payments. And as I said above, premium taxes are assessed on annuities in only a few states.

Many people find that it makes sense to withdraw earnings from an annuity annually. Others find that it makes sense to defer receiving earnings and thereby defer reporting taxable income. To each his own.
Thanks Stinky. Time to shop. Sounds like rates are dropping.
TheNightsToCome
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Re: Purchasing MYGAs (multi year guaranteed annuities) - mega thread

Post by TheNightsToCome »

bogles the mind wrote: Sun Jun 16, 2024 5:29 pm
Stinky wrote: Sun Jun 16, 2024 12:14 pm
bogles the mind wrote: Sun Jun 16, 2024 11:21 am Looks like Pa. has a 2% insurance premium tax on annuities and life insurace upon purchase. Can anyone confirm this to be true? So a $2000 tax on a $100,000 MYGA?
Here’s a reference on the application of premium taxes to annuities. Interestingly, Pennsylvania is not on the list.

https://www.immediateannuities.com/state-premium-tax/

Even in the relatively small number of states that tax annuities, they only levy a tax when “annuitization” happens - that is, when a periodic payment from the insurance company is purchased. That would apply to SPIAs and DIAs, and to MYGAs and other annuities when the payments are turned on.

So if you’re buying a MYGA for accumulation purposes, I don’t believe there would be a premium tax in any state. You can confirm this with your agent.
Removing interest payments regularly shouldn't trigger that I would guess. I am trying to avoid lump some interest payment at the end to keep my tax liability as low as possible. Better for me to spread it across multiple years. I am not seeing the benefit of deferred tax on interest payments unless there is a mechanisms to spread them out. Maybe I'm looking at this wrong.
There is a benefit to deferral for those with high income now who expect to have lower income at the time of contract maturity, in retirement.
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