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Scott
Scott (@guest_1649479)
July 8, 2023 07:35

Another difference between MYGAs and CDs is what happens if money is required before the specified time period elapses.
– MYGAs have a contingent deferred sales charge and a free withdrawal provision.
– Traditional bank CDs have a penalty, usually but not always based on recently earned interest.

Mike
Mike (@guest_1670545)
August 11, 2023 13:13

FYI – not all MYGA’s have a free withdrawal provision. The ones that do, usually limit the amount to either annual interest earned, 5% or 10%.

Longrangeshootr
Longrangeshootr (@guest_1695630)
September 16, 2023 17:03

I purchased 3 MYGAs with Canvas, the application was easy and used Plaid to fund them. One thing about MYGAs is the taxes you pay on interest are deferred until you withdraw the money. So when the term rolls up for renewal you could 1035 into another MYGA and avoid taxes.

Mike
Mike (@guest_1696824)
September 18, 2023 16:45

I am a fan of MYGA’s and use the product as an alternative to mid/long term CD’s. Two things to consider regarding MYGA’s:

(1.) Understand the insurance coverage and limitations that are provided by your state’s Life & Health Insurance Guaranty Association. This coverage is state specific – not federal like FDIC or NCUA. Also, understand how this coverage is applied in the domicile state of the issuing insurance company. This could be important in the case of a default.

(2.) If you are on Medicare, it may be better to take the interest payments yearly rather than a single large payment at the end of the contract. The Medicare Income-Related Monthly Adjustment Amount (IRMAA) is an amount you may pay in addition to your Part B or Part D premium if your income is above a certain level. Taking all the interest in the final year may cause your Medicare premiums to increase two years following.

Mike
Mike (@guest_1670644)
August 11, 2023 16:21

Good info. Thanks. Does anyone have experience with this company?

Deb
Deb (@guest_1441302)
September 8, 2022 18:57

Is a MYGA the same as a SPDA (single premium deferred annuity) ? If not, what is the difference?

Mike H
Mike H (@guest_1510927)
December 15, 2022 13:50

No, not the same. Here is a good explanation:
https://www.insurancegeek.com/annuities/types-of-annuities/

DP719
DP719 (@guest_1383995)
May 21, 2022 12:52

Having reviewed the rates at the links for the various terms offered in my state, I decided this is not for me. Thanks for posting it, Chuck.

John ATL
John ATL (@guest_1383971)
May 21, 2022 11:22

It would be interesting for someone here to do a practical comparison between two strategies:

(1) Buying a MYGA today. Assume the person does not withdraw her money early and also waits until after 59.5. What actual return does she get?

(2) Chasing bank and CC bonuses, plus keeping some in high interest accounts (e.g. HMBradley, Evansville, etc.) and purchasing I-bonds. Assume the person only buys necessary purchases on the CCs or uses the CCs to fund bank accounts. What return does she get?

Assume that the person has 100k of cash to play with and a reasonable salary to leverage DD requirements on bank bonuses. Which strategy is better in practice? I am guessing #2 has a significant advantage, but it would be interesting to see someone crunch the numbers. The downside of #2 of course is that it does involve some extra time: the time time to open and manage multiple deposit accounts.

I got the $700 citi bank bonus in about 80 days with a 50k investment. That’s about 6%. And the CC bonuses I get of course are all tax free.

patrick
patrick (@guest_1384011)
May 21, 2022 13:55

I suspect the best return is from:

(3) Put as much as you can in Ibonds and accounts paying 5% or more, chase bank bonuses that do not require large deposits, and put the rest in the best MYGA. Spend on CCs with bonuses.

MC
MC (@guest_1384037)
May 21, 2022 15:54

Some rough numbers from what we’ve done so far this year. Opened 3x BoA CCR cards, met spend by opening various accounts (Affinity, USBank, Tower FCU, etc.), rolled those funds into I-bonds. So thats about:

$600 BoA SUB
$1000 bank SUBs (approx)
$157 BoA CCR rewards on the 3k spend (online category and plat. honors)
$250 interest from 3k of I bonds assuming they are redeemed after 15 months to pay back the 0% CC balances

Total about $2k using free money.

Sam Wise
Sam Wise (@guest_1525494)
January 3, 2023 22:31

So you don’t get 1099 or report for CC bonus?? Chase and most other companies/banks report it. I recall in I even had to report 60k pt SUB because of cash value.

John
John (@guest_1527110)
January 5, 2023 17:34

Hi Sam. CC bonuses are tax free. Bonuses that come from opening savings/checking accounts are taxable. You are probably remembering a $600 cash value Chase SUB from opening a combined savings/checking.

The subject of what bonuses are taxable and which are not is well discussed on DoC and similar communities. Indeed, simply doing a web search for the question ARE CC SIGN UP BONUSES TAXABLE? will immediately give you the answer “Not Taxable.” Google is a great way to ask questions and get them answered.

Sam Wiser
Sam Wiser (@guest_1531125)
January 11, 2023 12:28

You’re right, I should have gone to IRS website or legal/financial sites & not relied on SAs from a website like this give me advice. Most of the questions here can be googled or answered by going directly to company websites, albeit it takes more time. Hence part of reason comment sections exist, to help and save time. Thx for nothing, and btw, there are indeed cases where taxable, found that out by using google.

John
John (@guest_1531451)
January 11, 2023 18:16

That’s really interesting, Sam. What specific credit card bonus did you find that is taxable? Or if it is an article online that claims that some CC bonuses are taxable, can you give us a link to it?

MidCoast
MidCoast (@guest_1383963)
May 21, 2022 10:55

Check out the website of Stan the Annuity Man for current MYGA quotes by state. Also info on every type of annuity. MYGAs were paying much more than CDs in recent years. Don’t know about now….

dean
dean (@guest_1383877)
May 21, 2022 03:34

An important factor when dealing with “investments that come from insurance companies” is the fees and expenses. I’m not going to crap on the article because it’s sometimes helpful to see new ideas. I would typically shy very far away from a product like this, so I may not be very well-informed, but I would think the fees and expenses should be mentioned.

Mike
Mike (@guest_1384008)
May 21, 2022 13:49

There are no ongoing fees or expenses with a MYGA. This product is simple and straight-forward, very different from other annuity products (variable, fixed, indexed, longevity, etc.). Its performance is just like a CD with the benefit of delaying taxes until the MYGA reaches maturity. But, many MYGA’s allow for penalty free interest withdraws in which case the interest withdrawn would be taxed in the year it is withdrawn – just like with a CD.
Often, MYGA’s are used in combination with CD’s in a ladder strategy.

WhatWeTacoBoutWhenWeTacoBoutLove
WhatWeTacoBoutWhenWeTacoBoutLove (@guest_1383858)
May 21, 2022 00:14

For the peanut gallery that doesn’t get why these posts are interesting and useful.

1. In the early days of 0% rate credit card promos, some enterprising people amassed very large credit lines (>$500k), manufacturerd that much spend, and deposited it in high yield savings accounts to earn 5+% risk-free. Getting that much 0% credit and MSing it might be a lot harder now, but interest rate arbitrage is still a useful tool to juice returns in the credit card and cash back game.

2. Portfolio construction with modern portfolio theory depends heavily on the rate of return of the risk-free asset. As a small investor you can use tools like I bonds and high yield insured accounts to attain a higher risk-free rate than the 3 month T bill that institutional investors use. So you can construct a portfolio with better risk-adjusted returns than traditional stock/bond/cash only portfolios.

COBOLCODERUSEALLCAPS
COBOLCODERUSEALLCAPS (@guest_1383952)
May 21, 2022 09:58

Thank you for posting this. I find that most people MSing are usually in it for airline miles. I’m a straight-up cashback person, so I do these sort of things. I most recently did this to a much smaller extent using i-bonds, given the high rates. It’s hard to find places to float 0% APR cash with many accounts having limits. I end up having to open multiple bank accounts to earn the rewards interest rates.

Jason
Jason (@guest_1383833)
May 20, 2022 20:39

Thank Chuck, I find this kind of content useful, and also value the comments when they offer something substantive on the subject. Many of these fixed term products seem like they may be useful when one wants to deal with a portion of a cash lump sum, and not dump the whole amount into the stock market or crypto, real estate, gold in Q1 2022 or whenever.

Peek
Peek (@guest_1383823)
May 20, 2022 20:19

Don’t buy investing products from life insurance companies, just don’t: https://clark.com/personal-finance-credit/investing-retirement/what-is-an-annuity/

Otto
Otto (@guest_1383825)
May 20, 2022 20:26

Agreed for the most part but I would consider MYGA an exception for a fixed income portion of a portfolio. The indexed, variable style ones are a ripoff for sure though vs investing yourself.

John ATL
John ATL (@guest_1383965)
May 21, 2022 11:01

For those who don’t take the time to read the article, be aware that Clark Howard is a big fan of certain kinds of annuities as an option in a future retiree’s toolkit. The two annuities he likes are simple transparent low-fee annuities, namely SPIAs and DIAs. I include below a link that part of the article where he talks about how “absolutely great” DIAs are (longevity anuities). He has said the same thing in his interview with Christine Benz of Morningstar.

https://clark.com/personal-finance-credit/investing-retirement/what-is-an-annuity/#2

Peek
Peek (@guest_1383974)
May 21, 2022 11:28

I’m just leery of insurance company products in general. I will admit these types of products could be good for certain situations. I would remain careful to read all terms and know what your getting into as far as your money be locked up, the risk of the company still existing. With these products they are taking a bet on the markets and how much they can make on the money you are investing. You are transferring risk to them and they are yielding the spread. These products certainly aren’t as bad as whole life insurance.

Mike
Mike (@guest_1384013)
May 21, 2022 14:08

I agree, except a MYGA, which he does not discuss in his article.
Also, please do not think of insurance products/annuities as investments. It’s more like buying a guaranteed future stream of income. I have purchased MYGA’s, but would never purchase any other annuity product. But, they may be appropriate for some people and some situations – just not me.

Peek
Peek (@guest_1384069)
May 21, 2022 19:03

This is true. I did find mention of them on bogleheads and many endorsing them as a CD alternative as you did. It is being stressed that you have to be cautious of the terms and potential penalties though. Seems like a good product to at least know is out there.