MYGA renewals

[damadcrapper]

Does anyone know why most carriers don't choose to offer a competitive rate and commission for MYGA's that are coming due? It almost seems like they just want it off the books. I need to move it to another carrier for a good rate (and a new commission!)

 

[drewdvo978]

Not sure why some carriers choose to do this-although some will allow you to keep it with them and be paid again. That said-lots of great rates on new money out there now!

 

[damadcrapper]

When you say paid, is it generally the same commission as a new sale or is it reduced? Is the new rate for the client the same as a new sales or lower? I would think it would make sense to provide a competitive rate AND commissions since it must be less expensive then chasing a new sale.

 

[drewdvo978]

I work for an IMO and I'm fairly certain FG Life as well as Delaware Life will allow you to keep it there and be paid full commission. These things do change often so it's always good to check with the carrier. I know in the past if FG's new rate was better you had to do a new app but they'd keep the money there-and pay you of course. I'd have to double check with Delaware if new ppwk is required. Both have solid rates currently as well. Best of luck!

 

[Allen Trent]

When you say paid, is it generally the same commission as a new sale or is it reduced? Is the new rate for the client the same as a new sales or lower? I would think it would make sense to provide a competitive rate AND commissions since it must be less expensive then chasing a new sale.

The longer it is on the books, the higher the chance of death claim where the surrender charge isn't charged at death, so the carrier is having to sell off the bonds/mortgages to get the cash to settle the claim. Right now, in a rising market of both CDs & MYGA with higher death claims of older clients, carriers are having more money out the door in death claims/surrenders/rollovers/interest/RMDs than new money coming in.

MYGAs written in last few years at low rates are being replaced by new money MYGA as the client & new agent believe 5% guaranteed for 5 years can more than cover a 3-5% surrender charge on a 2-3% MYGA written 2 yrs ago.

But on your specific question about renewal, that is by design for carriers & bank CDs. Higher lure in rate might be at little or no profit, but they know a certain percentage stay after where they can make money.

Some MYGA carriers with 5 yr at 5.5%is about 30% interest when compounded, add in 2%-3% commission & cost to issue & invest , they would need to be getting bonds & mortgages at 8% to even make 1-1.5% spread on the money they are holding.

For most seniors, CDs at 4-5% are better than NQ MYGA at same rates. IRS stats are that 80% of all people over age 70 pay no federal income tax. That means for these 80%, a NQ annuity is deferring an annual tax bill they don't owe so that when they die all the deferred gains they didn't owed will be taxed at their kids higher tax rate in a lump sum or 5 years.

For the 20% paying taxes still, NQ MYGA can possibly be good tax wise for deferral. But those 80% clients may be better off with CDs or single premium life when interest rates are this close. Tax deferral is actually a bad thing for those that don't pay in one taxes in long term tax planning as they are making uncle Sam a 20-35% beneficiary on assets that don't need to ever be taxed in most cases

 

[dfsterling]

Allen, seems every time I read one of your posts, you demonstrate a credible and distinguishable perspective on serving client interests. How might I contact you off-line, as I am working on an initiative which could benefit from your expertise? David F. Sterling, Esq., Consultant: [email protected].

 

[LostDollar]

For most seniors, CDs at 4-5% are better than NQ MYGA at same rates. IRS stats are that 80% of all people over age 70 pay no federal income tax. That means for these 80%, a NQ annuity is deferring an annual tax bill they don't owe so that when they die all the deferred gains they didn't owed will be taxed at their kids higher tax rate in a lump sum or 5 years.

For the 20% paying taxes still, NQ MYGA can possibly be good tax wise for deferral. But those 80% clients may be better off with CDs or single premium life when interest rates are this close. Tax deferral is actually a bad thing for those that don't pay in one taxes in long term tax planning as they are making uncle Sam a 20-35% beneficiary on assets that don't need to ever be taxed in most cases

Thank you for taking the time to make those comments.

I am not an agent with commission concerns, but I think these two paragraphs also provide some information a consumer can use in considering their individual situations.

 

[goillini52]

Allen, seems every time I read one of your posts, you demonstrate a credible and distinguishable perspective on serving client interests. How might I contact you off-line, as I am working on an initiative which could benefit from your expertise? David F. Sterling, Esq., Consultant: [email protected].

Esquire. Wow, that sounds very fancy.