Client Wants a Traditional Fixed Annuity

[Norwayguy]

She wants tax deferral. You mean the 1% she gets in the bank isn't low enough to avoid taxes?

Rick

Rick what bank is paying 1% in this day and age...I was checking my local bank and to hit a 1% interest rate I need to take out a 7 year CD.

 

[GreenSky]

Rick what bank is paying 1% in this day and age...I was checking my local bank and to hit a 1% interest rate I need to take out a 7 year CD.

My point was that tax deferral really isn't a big deal on $60K in the bank.

Increasing the yield is the important piece of the equation.

On the downside, is there any doubt that interest rates should skyrocket in the next few years? Locking in a 2-2.5% rate for 5-7 years might not be a great deal.

Rick

 

[iceco1d]

Presidential's MYGA rates are pretty poor.
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I'm assuming it is NQ considering she was looking at the annuity due to its tax deferral.

I only looked at MYGA. I haven't seen many 5-7yr fixed that offer much by way of guaranteed yield to surrender. With the rate environment today, which carriers have a decent minimum?

Good catch. I use Jackson's Max One XL for this type of money. Having over $100k helps though.
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My point was that tax deferral really isn't a big deal on $60K in the bank.

Increasing the yield is the important piece of the equation.

On the downside, is there any doubt that interest rates should skyrocket in the next few years? Locking in a 2-2.5% rate for 5-7 years might not be a great deal.

Rick

Rates should rise in the next 5 years, but I seriously doubt they skyrocket.

 

[Tahoe Ray]

My point was that tax deferral really isn't a big deal on $60K in the bank.

Increasing the yield is the important piece of the equation.

On the downside, is there any doubt that interest rates should skyrocket in the next few years? Locking in a 2-2.5% rate for 5-7 years might not be a great deal.

Rick

They would have to skyrocket. Keeping your money in the bank for two years at 50bp (liquid....getting ready for better rates). You'd need to find 3.8%+ 3 yr paper to outperform a 2.5% 5 yr purchased today.

What's a 3 yr CD at these days?

Its just ugly all around talking interest rates (unless you're looking for a mortgage)...not much out there.

 

[Iwillpay]

I have a client that wants a fixed annuity. Not an Indexed annuity. It's only about 60k and she is not interested in any income benefits or any other riders. She just wants principle protection and tax deferral and wants to know what interest she will earn. Does anyone know which companies have good fixed annuity rates and have a good rating? Thanks!

Sentinel Security life has decent fixed period annuity rates.
7 year fixed 3.20%

 

[Tahoe Ray]

Sentinel Security life has decent fixed period annuity rates.
7 year fixed 3.20%

Not in VA. I only like them in FL where you don't have to buy down the rate to get a death benefit.

 

[rikwells]

Yes, the money is NQ. Thank you very much for all the responses. I really appreciate it.
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Thank you. This is extremely helpful to me. I appreciate your time!

Guggenheim is B++ and its MYGA is at 3.2% for 7 years.

American Equity is A- and at 2.7%.

The Standard is A and at 2.15%

NA/Midland is A+ and at 2.05%

For 6 yr surrenders:

Equitrust (B++) is at 3%
Royal neighbors (A-) is 1.65%
The standard is 2.15%
Principal (A+) is 1.43%

For 5 yr surrenders:

Guggenheim is 2.8%
AE is 2.3%
Standard is 1.6%
And Minnesotta life (top A+ carrier), is 1.5%

I just give you the top MYGA (from my system) for each credit rating in 5,6 and 7.
I hope this helps.

 

[Newby]

With non-qualified money, do you guys ever offer single pay life insurance for those situations?

The fraternal company Slovakian Ladies Catholic Society has a single pay life that pays better interest than any of those annuities and pays dividends. It has 100% cash value on day one of the premium paid and zero surrender charges. You can leave with your principle, interest and dividends at any time. Plus on top of all that you have a nicer death benefit plus a fraternal benefit that gives you a 25% bonus on your death benefit after 2-years. It's a MEC but that just means it's taxed like an annuity doesn't it?

What would be the pluses and minuses of this type product for people wanting to park this money for a while? I guess one problem is they have to be healthy AND Catholic.

 

[scagnt83]

Rates should rise in the next 5 years, but I seriously doubt they skyrocket.

Ditto.
The Fed has pushed back the "Rate Increase" multiple times now.

IMO, the biggest thing affecting rates will be the election. If Obama stays Bernanke will stay. And he has indicated that we have another 1 to 2 years before he raises rates.

If Romney wins, its extremely likely he will replace the Fed chief and install a new one who is more hawkish. Meaning that they will most likely raise rates a bit sooner. They will definitely stop all the QE thats taking place and destroying our currency.

But even if the Fed raises rates, dont expect them to be sky high. Or to have a huge effect on product rates. Think back a year or two ago... it looked better than now, but it still sucked...
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Increasing the yield is the important piece of the equation.

On the downside, is there any doubt that interest rates should skyrocket in the next few years? Locking in a 2-2.5% rate for 5-7 years might not be a great deal.

Rick

Why not?

Lets say you wait two years for rates to rise, and in-between you get 1% per year, taxable.

For $100k, after 2 years, thats approximately $101,405.

If rates doubled after two years, and you locked in a 5 year CD, that would be 3.7% per year (double the highest current 5y CD).

So:
That puts the "short term" strategy at $114,171 after 7 years. (if rats actually doubled after two years...)

On the other hand:
A 7 year FA currently pays 3.45%.
That puts you at $126,798 after 7 years.


Thats a $12,627 difference!


Personally, I think the 5 year FA option at 3% is a good way to go these days if you want a guaranteed rate.
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With non-qualified money, do you guys ever offer single pay life insurance for those situations?

The fraternal company Slovakian Ladies Catholic Society has a single pay life that pays better interest than any of those annuities and pays dividends. It has 100% cash value on day one of the premium paid and zero surrender charges. You can leave with your principle, interest and dividends at any time. Plus on top of all that you have a nicer death benefit plus a fraternal benefit that gives you a 25% bonus on your death benefit after 2-years. It's a MEC but that just means it's taxed like an annuity doesn't it?

What would be the pluses and minuses of this type product for people wanting to park this money for a while? I guess one problem is they have to be healthy AND Catholic.

The biggest problem I see is the company.
Sure, the product sounds like it rocks.
But for one, Fraternals are not covered by SGAs.
Two, hardly anyone on this earth has heard of Slovakian Ladies Catholic Society...

If I go in with American Equity, or Sentinel, Athene, ANICO, etc. the client probably has not heard of them before. Or at least little of them.
BUT, they have the history and credentials to back them up, plus the SGA.

Im sure SLCS has a long history. But the name just throws you off. And dosnt scream "we are safe and secure and reputable".

It just seems like a really hard sell based on the company name alone.


And then you have underwriting to deal with.

But it sounds like a strong product.

 

[VolAgent]

My point was that tax deferral really isn't a big deal on $60K in the bank.

Increasing the yield is the important piece of the equation.

On the downside, is there any doubt that interest rates should skyrocket in the next few years? Locking in a 2-2.5% rate for 5-7 years might not be a great deal.

Rick

I've been hearing rates are going to skyrocket for about 4 years now. They seem to have only gone down.