Purchasing MYGAs (multi year guaranteed annuities) - mega thread

[MrM1]

Email today - Received Friday 9/20/24 4:29pm
Gainbridge rates going from 6.15% to 5.5% Sunday Sept 23

[Stinky]

Email today - Received Friday 9/20/24 4:29pm
Gainbridge rates going from 6.15% to 5.5% Sunday Sept 23

Thank you for the heads up. I haven't received an email yet.

I applied to Gainbridge yesterday for a policy to be funded from my IRA. The system told me that I had 45 days after the application date to "fund" the policy.

I do not know if the "rate lock" period is different for either cash or 1035 exchange funding.

[webtrojan]

Email today - Received Friday 9/20/24 4:29pm
Gainbridge rates going from 6.15% to 5.5% Sunday Sept 23

When is Gainbridge going down? Your message says Sunday 9/23. Is that Monday 9/23? I didn’t get an email. They just pulled my funds from my account today for mine.

[MrM1]

When is Gainbridge going down? Your message says Sunday 9/23. Is that Monday 9/23? I didn’t get an email. They just pulled my funds from my account today for mine.

Actually, it's not entirely clear as Sunday is not the 23rd but rather the 22nd

The actually email read

Rates decreasing from 6.15% APY to 5.50% APY starting Sunday, September 23, 2024, 12 AM EST

Hello,

Gainbridge® rates are dropping on September 23, 2024, 12 AM EST. Now is the perfect time to lock in an annuity while our rates are at record highs, ensuring you get the highest guaranteed returns.

To lock in up to 6.15% APY, you will need to sign the annuity application by Sunday, September 22, 2024, 11:59 PM EST.

Once you sign your annuity, your rate will be locked in for 30 days, regardless of any rate decrease. If your annuity is not funded after 30 days from signing your application, your rate will reflect the current effective rate at that time.

[webtrojan]

Thanks for the info. I have a friend who is interested in a Gainbridge MYGA. Better get busy.

[Airco_DH2_pilot]

Assuming I prefer a 60/40 stocks to fixed income ratio, and I want to use a MYGA for some fraction of the 40% fixed income allocation; what % of the fixed income portion should be in the MYGA?

While the MYGA seems ideal to provide fixed income; if I put the entire 40% of my fixed income portfolio allocation into MYGA’s; then I would be very limited in having enough liquid cash to rebalance the 60/40 portfolio in the event that the stock market declines. Is there a rule of thumb to guide the split between how much of the 40% fixed income allocation should go into MYGAs vs bond funds vs cash?

Thanks

[Stinky]

Assuming I prefer a 60/40 stocks to fixed income ratio, and I want to use a MYGA for some fraction of the 40% fixed income allocation; what % of the fixed income portion should be in the MYGA?

While the MYGA seems ideal to provide fixed income; if I put the entire 40% of my fixed income portfolio allocation into MYGA’s; then I would be very limited in having enough liquid cash to rebalance the 60/40 portfolio in the event that the stock market declines. Is there a rule of thumb to guide the split between how much of the 40% fixed income allocation should go into MYGAs vs bond funds vs cash?

Thanks

Your post touches on a major consideration for purchasing MYGAs - that is, the constrained liquidity of MYGAs except at the end of an interest guarantee period.

All MYGAs with which I am familiar have a surrender charge that applies to amounts in excess of any "free partial withdrawal" allowance. In addition, the majority of MYGAs have a "market value adjustment" provision that applies to excess withdrawals, which operates generally like the market value change on a bond would operate, but may also be further biased in favor of the company. Together, those two clauses make MYGAs relatively illiquid except for (usually) 30 days or so at the end of an interest guarantee period.

I can't give you a maximum proportion of fixed income asset investments to be housed in MYGAs. That would be your decision, depending on your risk tolerance and personal situation.

But here are some considerations that you could use to set your own guidelines, presuming that you want to have maximum flexibility to get liquidity from your MYGAs to respond to stock market declines -

--- Purchase MYGAs with the largest "free partial withdrawal" allowances. Many products allow 10% per policy year; a very few allow more.

--- If you're building a "book" of MYGAs, spread your purchases across the calendar year, so that policy anniversaries happen throughout the year.

--- Consider always taking the maximum free partial withdrawal on every MYGA and sticking the withdrawal proceeds into a money market or short term bond fund to be "dry powder" for potential equity market purchases. If the equity market downturn doesn't happen and your cash accumulates to a high level, you can always buy more MYGAs or other longer-term fixed income assets.

--- Search out MYGAs that don't have a market value adjustment feature for excess withdrawals.

Hope this helps.

[peke9898]

Stinky, Could you please look at your PM? Thanks,

[Airco_DH2_pilot]

Thanks Stinky,
Your ideas are helpful. I like your book of MYGAs idea. I also suppose I could make an assumption about how much of the fixed income allocation to keep in bonds, based on presumed a stock market drop scenario. For example, plan to keep enough in bonds to rebalance the portfolio when the stock market drops up to 15%.

Thanks

[Wrench]

Assuming I prefer a 60/40 stocks to fixed income ratio, and I want to use a MYGA for some fraction of the 40% fixed income allocation; what % of the fixed income portion should be in the MYGA?

While the MYGA seems ideal to provide fixed income; if I put the entire 40% of my fixed income portfolio allocation into MYGA’s; then I would be very limited in having enough liquid cash to rebalance the 60/40 portfolio in the event that the stock market declines. Is there a rule of thumb to guide the split between how much of the 40% fixed income allocation should go into MYGAs vs bond funds vs cash?

Thanks

In addition to Stinky's very on-point response, I would add that higher interest rates on fixed income investments always means higher risk. So, I would encourage you to be cautious putting all your fixed income allocation in one asset class like MYGAs. Yes, there are protections, and yes you can mediate the risk by only investing in more highly rated companies. But the benefits of diversification are just as great in fixed income securities as they are in stocks.

Wrench

[Stinky]

Stinky, Could you please look at your PM? Thanks,

I responded back.

[soretired]

Is the 10% free withdrawal cumulative? If I skip yr. one w/d can I w/d 20% penalty free in yr two? I'm with Puritan and Gainbridge. Also, can the first w/d be made anytime during the year?

[Stinky]

Is the 10% free withdrawal cumulative? If I skip yr. one w/d can I w/d 20% penalty free in yr two? I'm with Puritan and Gainbridge. Also, can the first w/d be made anytime during the year?

Almost never is a free partial withdrawal cumulative. In other words, use it or lose it. Check your contract to be sure.

A withdrawal typically can be made any time during a policy year. Check your policy to see if withdrawals are permitted during the first policy year (not typical), or the second and later years only.

[soretired]

Is the 10% free withdrawal cumulative? If I skip yr. one w/d can I w/d 20% penalty free in yr two? I'm with Puritan and Gainbridge. Also, can the first w/d be made anytime during the year?

Almost never is a free partial withdrawal cumulative. In other words, use it or lose it. Check your contract to be sure.

A withdrawal typically can be made any time during a policy year. Check your policy to see if withdrawals are permitted during the first policy year (not typical), or the second and later years only.

Thanks. That was my guess. Won't be doing one in yr 1 but might in yr 2 if my AA is out of balance.

[RuffReady]

I am on the fence about adding another gainbridge myga anybody know if gainbridge sends out same notice before rate change? I am assume they but no first hand knowledge.

I actually just applied for the 5 year Gainbridge MYGA at 6.15% this morning. Too good to pass up.

I don’t know about Gainbridge pre-notification. I’d strongly suggest that you call them to see what intelligence they can give you about rates and announcements.

Wish I could get in on the Gainbridge gravy train but for some inscrutable reason they can’t verify my identity and won’t consider any alternative means to their secret initiation rite. I’m a little wary of adding more to Canvas due to their lower rating.

[cashmoney]

I am on the fence about adding another gainbridge myga anybody know if gainbridge sends out same notice before rate change? I am assume they but no first hand knowledge.

I actually just applied for the 5 year Gainbridge MYGA at 6.15% this morning. Too good to pass up.

I don’t know about Gainbridge pre-notification. I’d strongly suggest that you call them to see what intelligence they can give you about rates and announcements.

Wish I could get in on the Gainbridge gravy train but for some inscrutable reason they can’t verify my identity and won’t consider any alternative means to their secret initiation rite. I’m a little wary of adding more to Canvas due to their lower rating.

This happened to me and phone call didn't help.I just created new account with another email address and problem solved.

[Weathering]

A withdrawal typically can be made any time during a policy year. Check your policy to see if withdrawals are permitted during the first policy year (not typical), or the second and later years only.

Question: Since interest compounds annually on the contract date, is it best to take a withdrawal shortly after the contact date and worst to take a withdrawal just before the contract date? (Wondering if the interest compounds based on the account value exactly on the contract date or if it compounds based on an average balance?)

I have a long time to figure out the best withdrawal date because I’ll begin withdrawing 10%/yr from my Gainbridge 10 year MYGA starting in 7 years.

[Stinky]

Question: Since interest compounds annually on the contract date, is it best to take a withdrawal shortly after the contact date and worst to take a withdrawal just before the contract date? (Wondering if the interest compounds based on the account value exactly on the contract date or if it compounds based on an average balance?)

I have a long time to figure out the best withdrawal date because I’ll begin withdrawing 10%/yr from my Gainbridge 10 year MYGA starting in 7 years.

Every MYGA that I’ve seen compounds interest daily.

So if you take a partial withdrawal late in the policy year, the interest will have had longer to compound within the MYGA. Also note that, if the MYGA is in a taxable account, then a larger part of a late-year withdrawal will be taxable interest.

[Stinky]

What is the procedure to fund a myga from a vanguard settlement fund?

Almost all of my MYGAs have been funded from my Vanguard IRA settlement fund.

Just indicate during the application process that the source of funds is your Vanguard account #xxxxxx. The insurance company will then request the funds from Vanguard. You’ll never touch the money.

A couple of Gainbridge updates.

First, the website is showing the rate drop. 5.40% for the three year product, up to 5.50% for durations 5-10. That’s a rate drop of about 0.65%, effective today.

Second, a shout out to Gainbridge for speedy customer service. I applied for a policy last Thursday, to be funded from my Vanguard IRA. On Friday, I got an email from Gainbridge, saying that my application was approved and they had requested funds from Vanguard. Then early this morning (Monday) I got an email from Vanguard, saying that the check was outbound to Gainbridge from my IRA settlement fund.

I’ve bought a number of MYGAs from my IRA, and I’ve never seen such rapid service. Gainbridge is really coming through, even as I expect they were slammed by applications last week as the 6.15% rate looked increasingly attractive.

[indexfundfan]

What is the procedure to fund a myga from a vanguard settlement fund?

Almost all of my MYGAs have been funded from my Vanguard IRA settlement fund.

Just indicate during the application process that the source of funds is your Vanguard account #xxxxxx. The insurance company will then request the funds from Vanguard. You’ll never touch the money.

A couple of Gainbridge updates.

First, the website is showing the rate drop. 5.40% for the three year product, up to 5.50% for durations 5-10. That’s a rate drop of about 0.65%, effective today.

Second, a shout out to Gainbridge for speedy customer service. I applied for a policy last Thursday, to be funded from my Vanguard IRA. On Friday, I got an email from Gainbridge, saying that my application was approved and they had requested funds from Vanguard. Then early this morning (Monday) I got an email from Vanguard, saying that the check was outbound to Gainbridge from my IRA settlement fund.

I’ve bought a number of MYGAs from my IRA, and I’ve never seen such rapid service. Gainbridge is really coming through, even as I expect they were slammed by applications last week as the 6.15% rate looked increasingly attractive.

That's fast. I assume the funds request from Vanguard must have been done electronically?

I haven't purchased a MYGA with IRA funds. If say when the MYGA reaches the end of the initial rate guarantee period and you don't want to renew it, what is the procedure to move the money back to Vanguard? Do they just send a check to Vanguard?

[Stinky]

I assume the funds request from Vanguard must have been done electronically?

I haven't purchased a MYGA with IRA funds. If say when the MYGA reaches the end of the initial rate guarantee period and you don't want to renew it, what is the procedure to move the money back to Vanguard? Do they just send a check to Vanguard?

I think that such transfer requests are generally via fax, rather than email, because fax is deemed to be more secure. So the transmittal is “1990’s electronic”.

While I’ve had several IRA MYGAs mature, I haven’t yet sent the funds back to Vanguard. Rather, I’ve reinvested the proceeds into other MYGAs. I believe those money transfers happen using paper check and snail mail rather than electronically. If/when I do move a maturing MYGA back to Vanguard, I’ll talk to both the insurer and Vanguard and figure it out.

[Airco_DH2_pilot]

Assuming I prefer a 60/40 stocks to fixed income ratio, and I want to use a MYGA for some fraction of the 40% fixed income allocation; what % of the fixed income portion should be in the MYGA?

While the MYGA seems ideal to provide fixed income; if I put the entire 40% of my fixed income portfolio allocation into MYGA’s; then I would be very limited in having enough liquid cash to rebalance the 60/40 portfolio in the event that the stock market declines. Is there a rule of thumb to guide the split between how much of the 40% fixed income allocation should go into MYGAs vs bond funds vs cash?

Thanks

In addition to Stinky's very on-point response, I would add that higher interest rates on fixed income investments always means higher risk. So, I would encourage you to be cautious putting all your fixed income allocation in one asset class like MYGAs. Yes, there are protections, and yes you can mediate the risk by only investing in more highly rated companies. But the benefits of diversification are just as great in fixed income securities as they are in stocks.

Wrench

Thanks Wrench, I see your point.

[ReadyOne]

Hello Stinky -

RE: Flexible Premium Deferred Annuity -

Do you know any good companies/sources for these? I don't see them on Blueprint, etc.

What should I be looking for or considering?

The intent -

Build an income stream that could be turned on ten years from now

Prefer not to buy a series of contracts

Evaluated MYGA to SPIA, still on the table but want to compare to Flexible Premium Deferred Annuity option

Thank you!

[Stinky]

Hello Stinky -

RE: Flexible Premium Deferred Annuity -

Do you know any good companies/sources for these? I don't see them on Blueprint, etc.

What should I be looking for or considering?

The intent -

Build an income stream that could be turned on ten years from now

Prefer not to buy a series of contracts

Evaluated MYGA to SPIA, still on the table but want to compare to Flexible Premium Deferred Annuity option

Thank you!

I’ve seen your post, and am awaiting more information before I respond.

[ReadyOne]

Hello Stinky -

RE: Flexible Premium Deferred Annuity -

Do you know any good companies/sources for these? I don't see them on Blueprint, etc.

What should I be looking for or considering?

The intent -

Build an income stream that could be turned on ten years from now

Prefer not to buy a series of contracts

Evaluated MYGA to SPIA, still on the table but want to compare to Flexible Premium Deferred Annuity option

Thank you!

I’ve seen your post, and am awaiting more information before I respond.

You are very kind. Thank you!

[Stinky]

Hello Stinky -

RE: Flexible Premium Deferred Annuity -

Do you know any good companies/sources for these? I don't see them on Blueprint, etc.

What should I be looking for or considering?

The intent -

Build an income stream that could be turned on ten years from now

Prefer not to buy a series of contracts

Evaluated MYGA to SPIA, still on the table but want to compare to Flexible Premium Deferred Annuity option

Thank you!

The product that quickly came to mind was a traditional flexible premium annuity. Many years ago, my former employer offered such a product, that allowed premium payments over a period of years and had interest rates that were set at the company’s discretion.

I agree that Blueprint Income doesn’t sell such a product. Neither does Stan the Annuity Man.

But Annuity Advantage sells products that have annual interest rate resets. Here’s a link to their page. https://www.annuityadvantage.com/annuit ... annuities/

What I don’t know is whether these products accept premiums after the first policy year. My contact at Annuity Advantage also didn’t know whether the top product on the list, from American General, accepts such premiums.

If you want to pursue the product you’re asking about, I suggest that you get in touch with Annuity Advantage directly.

[GaryA505]

Hello Stinky -

RE: Flexible Premium Deferred Annuity -

Do you know any good companies/sources for these? I don't see them on Blueprint, etc.

What should I be looking for or considering?

The intent -

Build an income stream that could be turned on ten years from now

Prefer not to buy a series of contracts

Evaluated MYGA to SPIA, still on the table but want to compare to Flexible Premium Deferred Annuity option

Thank you!

The product that quickly came to mind was a traditional flexible premium annuity. Many years ago, my former employer offered such a product, that allowed premium payments over a period of years and had interest rates that were set at the company’s discretion.

I agree that Blueprint Income doesn’t sell such a product. Neither does Stan the Annuity Man.

But Annuity Advantage sells products that have annual interest rate resets. Here’s a link to their page. https://www.annuityadvantage.com/annuit ... annuities/

What I don’t know is whether these products accept premiums after the first policy year. My contact at Annuity Advantage also didn’t know whether the top product on the list, from American General, accepts such premiums.

If you want to pursue the product you’re asking about, I suggest that you get in touch with Annuity Advantage directly.

Wait, an annual interest rate reset? I never heard of that before. What kind of annuity is that, FIA?

[Stinky]

Wait, an annual interest rate reset? I never heard of that before. What kind of annuity is that, FIA?

No, it is not an indexed annuity. Rather, the interest rate is declared annually by the insurance company.

Here’s a link to a sample product from the Annuity Advantage website. The current base rate is 4.30%, the minimum guaranteed rate is 1.95%, and there is a bonus of 1.50% in the first year. https://www.annuityadvantage.com/tradit ... thout-rop/

Products with features like these were popular 20-30 years ago, but sales have been overtaken by indexed annuities and MYGAs.

The narrow question I don’t know the answer to is whether these products can accept premiums after the initial premium. Back in the day, they could accept subsequent premiums, but I just don’t know if current products can accept renewal premiums.

[GaryA505]

Wait, an annual interest rate reset? I never heard of that before. What kind of annuity is that, FIA?

No, it is not an indexed annuity. Rather, the interest rate is declared annually by the insurance company.

Here’s a link to a sample product from the Annuity Advantage website. The current base rate is 4.30%, the minimum guaranteed rate is 1.95%, and there is a bonus of 1.50% in the first year. https://www.annuityadvantage.com/tradit ... thout-rop/

Products with features like these were popular 20-30 years ago, but sales have been overtaken by indexed annuities and MYGAs.

The narrow question I don’t know the answer to is whether these products can accept premiums after the initial premium. Back in the day, they could accept subsequent premiums, but I just don’t know if current products can accept renewal premiums.

What happens if you just let it run after the Term expires?

[Stinky]

Wait, an annual interest rate reset? I never heard of that before. What kind of annuity is that, FIA?

No, it is not an indexed annuity. Rather, the interest rate is declared annually by the insurance company.

Here’s a link to a sample product from the Annuity Advantage website. The current base rate is 4.30%, the minimum guaranteed rate is 1.95%, and there is a bonus of 1.50% in the first year. https://www.annuityadvantage.com/tradit ... thout-rop/

Products with features like these were popular 20-30 years ago, but sales have been overtaken by indexed annuities and MYGAs.

The narrow question I don’t know the answer to is whether these products can accept premiums after the initial premium. Back in the day, they could accept subsequent premiums, but I just don’t know if current products can accept renewal premiums.

What happens if you just let it run after the Term expires?

I expect that you’d continue to receive the declared rate (currently 4.30%) without surrender charges or MVA if you kept the product past the initial 5 year term.

But that’s just my guess. Anybody interested in the product would need to confirm with the agent and/or the insurance company.

[WestWorld1986]

It appears that there are no Brighthouse MYGA offerings on Blueprint. I wonder what’s driving this.

[RuffReady]

I am on the fence about adding another gainbridge myga anybody know if gainbridge sends out same notice before rate change? I am assume they but no first hand knowledge.

I actually just applied for the 5 year Gainbridge MYGA at 6.15% this morning. Too good to pass up.

I don’t know about Gainbridge pre-notification. I’d strongly suggest that you call them to see what intelligence they can give you about rates and announcements.

Wish I could get in on the Gainbridge gravy train but for some inscrutable reason they can’t verify my identity and won’t consider any alternative means to their secret initiation rite. I’m a little wary of adding more to Canvas due to their lower rating.

This happened to me and phone call didn't help.I just created new account with another email address and problem solved.

Thanks - I tried that and I still couldn’t get verified. Emailed their compliance officer and was basically told that I was out of luck.

[slay65]

Just funded my 1st MYGA through Gainbridge that I had applied for last week. I needed a safe place to park some money for 5 years that I plan to use for my "soon to start" retirement and the 6+% rate was too good to pass up.

I will admit I was a little leery about buying it, but I did some research and watch the boglehead video that Stinky discussed annuities and decided to give it a go. I did stay below my state threshold just in case...

Thanks all for all the great posts in this thread. I think I read most of them. And Stinky thanks for all the contributions on this topic!

[Stinky]

Just funded my 1st MYGA through Gainbridge that I had applied for last week. I needed a safe place to park some money for 5 years that I plan to use for my "soon to start" retirement and the 6+% rate was too good to pass up.

I will admit I was a little leery about buying it, but I did some research and watch the boglehead video that Stinky discussed annuities and decided to give it a go. I did stay below my state threshold just in case...

Thanks all for all the great posts in this thread. I think I read most of them. And Stinky thanks for all the contributions on this topic!

I’m pleased that you found this thread and the video to be useful.

I agree that the 6+% rate last week was pretty darned attractive!

[cvn74n2]

I assume the funds request from Vanguard must have been done electronically?

I haven't purchased a MYGA with IRA funds. If say when the MYGA reaches the end of the initial rate guarantee period and you don't want to renew it, what is the procedure to move the money back to Vanguard? Do they just send a check to Vanguard?

I think that such transfer requests are generally via fax, rather than email, because fax is deemed to be more secure. So the transmittal is “1990’s electronic”.

While I’ve had several IRA MYGAs mature, I haven’t yet sent the funds back to Vanguard. Rather, I’ve reinvested the proceeds into other MYGAs. I believe those money transfers happen using paper check and snail mail rather than electronically. If/when I do move a maturing MYGA back to Vanguard, I’ll talk to both the insurer and Vanguard and figure it out.

I too am interested in how to surrender the contracts after the initial guarantee period and return the funds back into our Traditional IRAs within time constraints. I figure if all else fails, I will take the distribution and do an indirect rollover, recognizing only one can be done in a 365 day timeframe.

[bog007]

canvas rate change oct 1

[Weathering]

canvas rate change oct 1

Canvas new (lower) rates appeared on their site a little earlier today. Their systems and people seem to be overloaded this past week. I completed an instant application for a FutureFund last Tuesday and the ACH still hasn’t occurred as of now (Tuesday morning). Those ACH transactions used to happen on the night of the Canvas application. I called in today and was told the end of the month, end of the quarter, and interest rate change all happening at once has caused lots of delays. They kept telling me to wait as they looked up my policy number saying the system was slow today. Then they couldn’t give me any eta on when the ACH may occur. After the call, I felt they hadn’t provided me with either customer service or competence. I can only hope they get better over the years. Regarding my funds for the ACH, I should have used a Fidelity Spend/Save account so the funds would be earning 5% while sitting there. Instead, they are in a credit union checking account earning essentially 0%. But if this MYGA pays the 6.55% it says it will (tbd in 7 years at maturity), then all will be forgiven.

[jhblegend]

canvas rate change oct 1

But if this MYGA pays the 6.55% it says it will (tbd in 7 years at maturity), then all will be forgiven.

While your critique is valid, it is likely that this is simply a function of the large amount of business before rate decrease. I wouldn't be too worried once they work through all the business. Do keep us updated on the timeline.

[johnpelder]

Good afternoon. I thought I'd share my timeline with establishing new contracts, as I just purchased new ones at both Canvas and Gainbridge. My experience with both was relatively positive, with Gainbridge taking slightly longer establish and fund than for Canvas. Canvas took 1 day to establish and 3 days to get funding confirmation. Gainbridge seemed on track to match, but a typo in our application created the need to reapply. This is where the problem grew, as Gainbridge was very difficult to get on the phone. When we did get them, they advised they would close out the original application and we would start fresh. However, they did not close out the original as they said, so we ended up getting financial notices for both the correct and incorrect accounts, then back to the drawing board to work it out with them.

I'll attribute it to a crush of business due to the rate change. Aside from that I'm pleased with both companies.