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  4. Nationwide 5.15% - 7Yr High-Band MVA.... Why Not?

Nationwide 5.15% - 7Yr High-Band MVA.... Why Not?

simonebaxter
  |     |   10 posts since 2016

While I understand the safety of our FDIC deposits, I see very little downside to many of the listed Multi Year Guaranteed Annuities (MYGA). This Nationwide 5.15% - 7yr High-Band MVA popped up yesterday (min $100k), And I am not seeing a downside. Any thoughts?

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2


Answers
CTM
  |     |   179 posts since 2010
1. You have to deal with an insurance agent
2. Surrender charges of 8%,8%,7%,6%,5%,4%,3%
3. MVA
4. A litany of other add-ons they will try to sell you
5. Going long in a rising interest rate environment
6. Chase 7 year brokered CD @ 5.00%, 5 year @ 4.85% ($ 1K minimum)
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9
GH1
  |     |   1,054 posts since 2017
Yes a 5 year CD makes much more sense
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2
biobaysharon
  |     |   1 posts since 2022
Which Brokerage works with Chase?
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1
CTM
  |     |   179 posts since 2010
Those numbers were from E*Trade.

Chase CDs are also available at TD Ameritrade. I don't currently see any at Merrill.
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2
Blade
  |     |   49 posts since 2018
These are "Non-Callable" 5yr+ CDs? Be sure to check on that part as the odds of having the CD called and paid back by the issuer well before 5yrs is probably fairly high. I haven't seen many, if any, 5yr+ brokered CD offered that weren't callable, but I only check Vanguard and Fidelity each day. Maybe others have them?
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3
Choice
  |     |   937 posts since 2020
All annuities are not the same...several years ago I was looking for some for a 403b account. Research reflected then that the so-called "best" were those registered to be sold in NY. Remember they are state regulated with minimal insurance backing. Ask to see and read the entire policy before buying and be cautious as to what is included in the policy, e.g. is the transmittal letter part of the deal and was it qualified in the state? Went around and around with one issuer who tried to "take away what's in the policy by what the transmittal letter had in it."  Then I'd look at interest rates! :)
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1
simonebaxter
  |     |   10 posts since 2016
Thanks, good advise.
BTW, Nationwide already, in less than a day dropped the 5.15% down to 4.95%
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1
yogooglethis
  |     |   32 posts since 2022
You can use a website like this to get rates and not have to talk to an agent and you will not get upsold https://www.blueprintincome.com/fixed-annuities?premium=100000&states=FL
IMO one of the biggest benefits of MYGA is the the tax deferral of interest and the ability to 1035 exchange contract to new MYGA and end of term and keep the deferral going
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3
GreenDream
  |     |   358 posts since 2019
MYGA are probably the closest thing to a CD in the world of annuities and are considered fairly safe investments.

While I don't know the specifics of the MYGA contracts you are looking at, here are some things, in general, you should be aware of/keep a watch out for:
- Since there's no FDIC insurance, you are counting on long term viability of the insurance company offering the MYGA (Nationwide is a large and well know name in the insurance biz, so probably one of the safer choices).
- possible fees and commissions,
- surrender charges, though there may be waivers for certain situations (such as terminal illness or long-term care)
- costly optional riders.
- Withdrawals before age 59.5 may be subject to a 10% penalty.
- Usually must be purchased five years before you want to start receiving income

Bottom line is that a MYGA, like any other insurance product, is a contract. Be sure to pay attention to the terms of the contract before entering into it.
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5
CuriousDave
  |     |   233 posts since 2018
In addition to the drawbacks mentioned by the other commenters, you must face the same problem as would-be CD purchasers: where are interest rates headed? If you commit your money now and rates continue rising, you will have short-changed yourself. As with CDs, you can build a ladder of annuities to partially insure yourself, but the rungs of the ladder will need to be long enough to avoid those pesky surrender charges.
Also, bear in mind that several states charge a “premium tax” when you begin annuitizing your contract (I.e. when you begin to take regular distributions). The typical rate is 0.50% and that is usually applied to reduce the accumulated value of your account, but if the annuity funds do not come from tax sheltered plans such as your 403(b), the rate is higher (California’s tax is 2.35%). Although it’s true that there is no federal insurance on annuities, most states, which regulate insurance companies, do have some kind of limited coverage for insurance and annuity products.
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2
Choice
  |     |   937 posts since 2020
Everything is negotiable
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