MYGA with multiple interest rate periods

Feb 2, 2019

  1. Allen Trent
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    Allen Trent Guru

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    Anyone aware of any carriers that allow multiple interest rate periods within 1 contract versus having to open a separate annuity contract for each desired length of interest rate lock? I.E. laddering within 1 policy.

    Client with 200k wants 50k in 5 yr, 50k 3yr, 50k 1yr & 50k in current month to month. At the end of each interest rate maturity, they may elect a new rate period lock at that time.
     
  2. Tahoe Ray
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    I don't think that exists, Allen. I think that you're going to be stuck with a 3 and 5 year MYGA and CDs/money market for the rest.

    It's a really interesting idea though.
     
  3. Allen Trent
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    Thanks. I assumed it might not exist, but it would be great for consumer, agent & possibly carrier.

    With so many other variable & indexed products out there that allow allocation to multiple categories, this would seem possible.

    Inverted yield curve today makes some of the short term rates look better. Filling out 1 application instead of 3 or 4 would be easier too.
     
  4. Tahoe Ray
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    Some MYGAs have the same app/disclosure etc. regardless of length. You have just a check box/fill in rates for the length so a few copies of the same completed app should do the trick (of course, the client will have more signatures than getting a mortgage but what can you do?)
     
  5. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    If you're dealing with non-qualified annuities, combining them all into one contract would negate the tax advantage of having multiple contracts. (Obviously, with qualified contracts, it wouldn't matter.)

    Annuity Tax Legislation - Annuity Financial

     
    DHK, Feb 2, 2019
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  6. Allen Trent
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    Actually, having multiple NQ contracts has no benefit from my understanding. The tax laws don't allow you to take tax free cost basis from 1 contract if you own other NQ with gains. I think it is based on all bought in same year with same carrier. Just dealt with this on a 750k NQ where client wanted 3 separate 5 yr myga so that they could decide for each account in 5 yrs of they wanted to ladder a 1, 3 or 5yr rate.

    I will check, but I believe it is called Serial Annuity contracts as an Aggregation rule. Very similar to how people trying to do back door Roth IRA get burned because they have to aggregate all forms of IRAs they already own, this getting taxed on a pro rata share of the tax free conversion to total taxable IRA accounts already in existence with all custodians.
     
  7. MAnnuity
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    It's been a while and I am not sure if they still offer it, but didn't Integrity have a product like this? I believe it was a 7 or 10 year surrender, and you could allocate funds to different maturity periods/different rates. They offered a "QIO" or quarterly interest option.
     
  8. Allen Trent
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    I am not sure, but I will look into it. thank you
     
  9. Allen Trent
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  10. Tahoe Ray
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    Good info. Thank you.
     
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