Looking To Lock In About A 5 1/2–6% Yield For 10 Year

Chas21 | Nov 3, 2022 | 4 posts since 2022

Question, does anybody have experience with multi guaranteed annuity payments right now there were some 10 years that are 5.4% how come there has not been mention of this as a means for safe money.

The only downside like everything else. If you buy it you have to pay surrender charge usually about 7% having bought a Fidelity brokered CD. At 3.55% to get rid of that now it will cost me 10% at least on the open market. I would appreciate if anybody could tell me a downside I am not seeing.

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Answers

CDsuckers | Nov 4, 2022 | 70 posts since 2022

Well, it's insurance isn't backed by a federal corporation like bank and credit unions.
It's just backed by a state supervised private non-profit corporation (the state doesn't back-stop it).
Each state's limits are different (some lower some higher than federal coverage).
In the state where I live it's only 80% of the annuity contract value up to a $250,000 limit.
That's the absolutely worst insurance of any state (potential loss of $50,000).

That 5.4% yield includes principal paybacks.
So, you really can't directly compare it to a CD or a bond whose APY is soley based on interest earned.

If I lived anywhere but California, I might look into it deeper.

sharon907 | Nov 4, 2022 | 36 posts since 2022

MYGA rates do not (should not) include any return of principal. They are similar to other fixed income, in that way.

Unlike bonds, if a non spouse beneficiary inherits, the MYGA is normally redeemed early.

sharon907 | Nov 4, 2022 | 36 posts since 2022

There is no "insurance" for annuities. I think of them as bond funds that pay a bit more, because the insurance company extracts fees from some of the annuity owners. These can be considered "survivor credits." MYGA Annuity owners that don't incur fees, benefit from fees paid by others.

State guaranty associations provide some assistance in the event of insurer insolvency. Being declared insolvent can take years. In the interim there can be rehabilitation and court ordered supervision. Until the insurance company is insolvent, the annuity owner does not have recourse with the association.

Pay attention to the actual MYGA terms. When purchased, it may have a 20-year term, with a minimum rate of 1%. And an initial rate of 5% for five years. If the insurance company goes into court supervision before the five year maturity, the annuity owner may be prevented from redeeming, and paid 1%, until the company is rehabilitated or deemed insolvent.

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