Multi-Year Guaranteed Annuities

Sorry to swear right in the subject! Clark warns us about the high commissions on annuities. There is an annuity that seems like a CD with deferred interest. The rates seem comparable to CDs. I guess a small percent lower in return could cover the commission but with the rates being similar and deferring taxes it seems like a potentially good option. I would like to hear more about better options and the downsides to these guaranteed annuities.


Numbers, please. What the proposal? The number sharks here want to dine.

The only thing that matters is what you pay, and the series of monthly or annual cash flows you are guaranteed and when they start and end. Any kind of other mumbojumbo is just salesperson obfuscation.

Even given a complex series of cash flow, the IRR or Internal Rate of Return, can be computed and directly compared to other investments.

Not sure there is much upside, other than guarantee not to lose value. I still have one called a fixed annuity and it held steady over the last disasterous Biden year. But the flim flam is thick. This instrument was sold as just about the greatest thing since sliced bread. Gives the owner a 15% bump in value just for having it.

Well not so fast hold your horses. That bump is called “Protected Income Value” even for a Roth that does not “have income,” and you only get it after you fulfill all the requirements, like holding it a full 10 years. Then if you want the PIV rather than the “Accumulation Value” you must take it over at least 5 years. In other words, insurance company keeps your money and dribbles it out a little each month or year. This is like winning the 20 million dollar lottery prize. The ONLY way you see the 20 is if it comes in payments over a number of years.

FYI there is a guy out there named Fisher who hates annuities so much he will pay for your surrender charge if you let him manage your money. He sends slick green propaganda in the mail.

This is not what I was thinking when I heard Annuity. They have 2, 3, 4, or 5 year guaranteed interest rate periods, much like CDs. The rate they quoted for 2 years was 4.5% I checked bank rate and saw some for 4.6% the same day. When it matures you have your principal plus the interest. Somehow it seems like the tax is deferred until you make a withdrawal. When the period is up you can roll it into another period.

I would look into the Prospectus and see what the underlying investments are. If they are steaming piles of shaving cream then it makes the entire offer more risky if a financial panic ensues. Is it guaranteed as in FDIC insured quality or do that make “best efforts” to pay? The devil’s in the details!

It may be a loss leader to get you hooked on a real steaming pile with that same firm and agent later…

Sell gas at a loss, beer and chips and jerky for a profit

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I guess if I just buy gas then I am getting an advantage. Bernie Madoff and FTX were paying for awhile. Sent for the details to see if it is shaving cream :slight_smile:

Ask yourself… why are you considering an Annuity.
It is unlikely you will do better than a couple of well chosen MFs.

However if you are on the edge and need discipline in your spending could be an answer.

Obviously the Annuity folks think they can do better than what they are paying you. That is my opinion.

That said, I do not need whatever positives the annuity might provide.

#DashQuark… The first tangible positive executed in an annuity sale is the annuity salesman’s commission.

THAT’s why the salesman is talking to you… :nerd_face:

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You are correct…There are smoke and mirror annuities, and then there are fixed annuities…also referred to as CD annuities or MYGA (Multi year guaranteed annuities)

A fixed annuity is basically no different than a CD…the rates are guaranteed, and backed by the financial rating of the annuity carrier. However, all interest earned is tax deferred, potetntially making them even more attractive to someone in a higher tax bracket.

In todays crazy inflation economy, for example, you could get a 3 year fixed annuity with a guaranteed yield to surrender at 5.3%, A 5 year fixed annuity can pay 5.6% guaranteed. No fine print…no big commissions for people selling them…just simple to understand guarantees…unlike a lot of other types of annuities that are virtually impossible to understand…hence the reluctance many people have when someone mentions the word “annuity”

Not saying I recommend them…just saying they exist, and 5%+ is not a terrible return


MYGAs are issued by an insurance company and comparable to the rates on CDs. They are not FDIC insured thus CDs and Treasury Bonds could be lower risk. They’re tax deferred and thus subject to a 10% penalty if cashed out before 59 1/2. These are the best annuities if you change your mind.

Equity index annuities (EIAs) have an index option return for 1-3 years but then lock you in for 10-15 years. You can buy an income rider for a fee but those guarantees only apply if you annuitize. The upfront bonus might only apply to the income rider.

Income annuities are longevity insurance. They provide protection against outliving your money. Your payment depends on the interest rate, how long you choose to defer the annuity, and your mortality credit. The net present value or IRR is usually very low. You can get income for life, income for you and another person, period certain, and cash/installment refund.

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The bigger question is how much should be in MYGAs or CDs or how much should be in income annuities or indexed or variable annuities if anything?

What should be in stocks, bonds, cash, real estate, or commodities, currencies, crypto, etc and variations of these such as preferred stock?

Asset Allocation depends on when you need the money and your risk tolerance level

Thanks. Almost 39 years old. Don’t know when I want to retire so I estimate 24 years.

If so:

Have a 40% pension on a $68,000 salary

Assets: $350,000
Liabilities $294,000

May need to take a home equity loan or debt management plan as I racked up debt from car repairs, home repairs, and adoption expenses. Of course before I utilize one of these options, I need to make sure our spending is under control.

401k: $84,000
Taxable Account $5,400
RothIRA: $4,700
Refund: $8,000 to $11,000
Wife’s 403B: $5,500
Wife’s IRA: $1,450
Wife’s 2013 not growing IRA: $2,300
Wife’s 403B prior employer - $1,400+
House Cost: $227,500 - MV $260,000 - Assessed Value = $220,000 - Property Tax = $1,875/yr
Subaru 2014 - $3,000
Dodge - 2016 - $6,500

Mortgage $211,000 at 2.625%
Student Loans: $34,000 - $7,200 already forgiven and $25,000 to be forgiven in 2026. $9,000 is wife’s undergraduate FFEL loans
Credit Cards: $37,000 - $15,000 at 5% till Nov of 2023, $4,000 at 0% till November of 2023, and $18,000 due in Feb of 2024 - $1,375 due 1/13/23

In-law debt:
Forgiven Car Loan: $4,000
Forgiven Cell Phone Bill: $3,600+

Have 97% in stocks. Have $5,000 of a 401k loan and a $50 EFA call with a one year expiration; these offset each other.

Hope to go towards a 70/30 retirement allocation so I will have a need for future income

“May need to take a home equity loan or debt management plan. Of course before I utilize one of these options I need to make sure our spending is under control.”

It is good that you recognize your debt issue. You can calculate your debt-to-income ratio. Ideally the ratio including mortgage payments is in the mid 30% range. If you have not done so than your credit report can be helpful to make sure you have identified all of your debt. Popular budgeting apps include mint and YNAB. can be used to guide debt repayment when you have freed up money to pay off your debt. If you decide to get assistance with a debt management plan, find a non-profit associated with the national foundation for credit counseling at (National Foundation for Credit Counseling). The non-profit can work out with you a several year debt repayment plan. The NFCC has negotiated lower interest rates agreements with credit card companies.

“What should be in stocks, bonds, cash, real estate, or commodities, currencies, crypto, etc and variations of these such as preferred stock?”

A very good starting point for you to answer your question is the free PDF If You Can by William Bernstein. He is an influential financial analyst whose recommendations are based on studies in the financial literature. He lists the most important things to know about investing. He also lists several excellent investing books for additional reading. (chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/

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I’m a supply-side advocate when it comes to personal finance. At 39 you still have time to reset your earnings potential. I spent money on non-essential stuff like boats, airplanes and recreation all my life and enjoyed doing so.

Most people are capable of being in the top 5% or 10% earners but never reach their earnings potential. The key to making money is to find a place where big money is changing hands and find ways for one of the people at that table to pay you to be there as their advocate.

I didn’t start saving for retirement until I was over 55 but still enjoy a comfortable retirement life. Just about anyone can do it, if they make it a priority.


I would not count your house as an asset for retirement planning purposes. I just think it over-estimates your situation. It’s a reserve asset, it’s the last thing most people convert into cash, and usually they can’t choose the best terms when the conversion takes place — they have to make a sudden move to assisted living, or they have to sell to pay for medical care or long-term care, and when they need to sell maybe the market is down. It’s often outdated and not in great condition by the time people sell in their 80s. If you’re going to carry it as a retirement asset… discount it by 50%. The costs of screwing up retirement planning are so serious, you need to be careful about it. No do-overs possible.

Your phone bill, your credit card bills - have you solved the behavioral problems which cause those in the first place?