forum threadWolfTheCat posted Yesterday 10:28 AM
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forum threadWolfTheCat posted Yesterday 10:28 AM
No-fee 3-7yr tax-deferred or Roth annuity, 6-6.2% fixed APY
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Posting an odd deal, and before you panic at the word "annuity", this isn't one of those high-fee hard-sell annuities. Acts more like a simple CD than anything else. A 6+% state-guaranteed fixed rate is very good right now, beating all competitive savings accounts, CDs, treasuries, and investment-grade bonds.
Facts and points:
Facts and points:
- 3-year 6% APR, 5-year 6.15%, 7-year 6.2%
- $2,500 minimum investment. (Gainbridge offers a similar fee-free annuity product for a $1,000 minimum, but isn't running a rate special)
- Tax-deferred annuity can be funded with cash or IRA/401(k) funds.
- Roth annuity can be funded with Roth IRA/401(k) rollover.
- You may withdraw up to 10% per year without a fee, or hold to maturity and withdraw it all.
- Smart Move: If interest rates go up, take the 10% withdrawal and reinvest at a higher rate. If they go down, hold and let accumulate.
- Withdrawal may be subject to tax penalty if you are under 59.5yrs old and it isn't rolled over into another similarly-taxed investment. Consult tax advisor.
- It will automatically rollover like a bank CD to another annuity if you don't do anything and let it mature. Set a calendar reminder so this doesn't happen.
- The insurance company backing this is Puritan Life Insurance Company of America (NAIC #71390).
- Puritan Life Insurance is NOT a super-stable insurance company. AM Best ratings are lowish (B++, as of 8/1), and they are currently under watch because private equity is looking into acquiring them (which may be the reason for the high rate right now). If you want a similar product with a better company, Gainbridge is a good choice, but they aren't running a sale. Like any investment, do your research before buying.
- Most states have a state insurance guaranty association that guarantees fixed annuities like this one, and will make sure the contract is honored, up to a state limit (usually $300k, but check your state).
- I would not recommend buying if your state doesn't have this and would not recommend buying above your state guaranty limit. Also verify your state guaranty association covers fixed annuities like this one.
- State guaranty associations are also looking into the merger. If the states don't like it, they could block it, preventing the merged firm from selling insurance in their state.
- Not available in five states, including New York.
- Terms on withdrawing from tax-advantaged annuities are very similar to IRAs and Roths, depending on what kind you have. 59 1/2 rule, RMDs, 5-year rule, all that stuff is there. Consult a tax advisor or know your tax law.
- They offer extra riders with fees on purchase, that vary by state. I am not commenting on whether any of the riders are worth the fees.
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Deal Details
Community Notes
About the Poster
Posting an odd deal, and before you panic at the word "annuity", this isn't one of those high-fee hard-sell annuities. Acts more like a simple CD than anything else. A 6+% state-guaranteed fixed rate is very good right now, beating all competitive savings accounts, CDs, treasuries, and investment-grade bonds.
Facts and points:
Facts and points:
- 3-year 6% APR, 5-year 6.15%, 7-year 6.2%
- $2,500 minimum investment. (Gainbridge offers a similar fee-free annuity product for a $1,000 minimum, but isn't running a rate special)
- Tax-deferred annuity can be funded with cash or IRA/401(k) funds.
- Roth annuity can be funded with Roth IRA/401(k) rollover.
- You may withdraw up to 10% per year without a fee, or hold to maturity and withdraw it all.
- Smart Move: If interest rates go up, take the 10% withdrawal and reinvest at a higher rate. If they go down, hold and let accumulate.
- Withdrawal may be subject to tax penalty if you are under 59.5yrs old and it isn't rolled over into another similarly-taxed investment. Consult tax advisor.
- It will automatically rollover like a bank CD to another annuity if you don't do anything and let it mature. Set a calendar reminder so this doesn't happen.
- The insurance company backing this is Puritan Life Insurance Company of America (NAIC #71390).
- Puritan Life Insurance is NOT a super-stable insurance company. AM Best ratings are lowish (B++, as of 8/1), and they are currently under watch because private equity is looking into acquiring them (which may be the reason for the high rate right now). If you want a similar product with a better company, Gainbridge is a good choice, but they aren't running a sale. Like any investment, do your research before buying.
- Most states have a state insurance guaranty association that guarantees fixed annuities like this one, and will make sure the contract is honored, up to a state limit (usually $300k, but check your state).
- I would not recommend buying if your state doesn't have this and would not recommend buying above your state guaranty limit. Also verify your state guaranty association covers fixed annuities like this one.
- State guaranty associations are also looking into the merger. If the states don't like it, they could block it, preventing the merged firm from selling insurance in their state.
- Not available in five states, including New York.
- Terms on withdrawing from tax-advantaged annuities are very similar to IRAs and Roths, depending on what kind you have. 59 1/2 rule, RMDs, 5-year rule, all that stuff is there. Consult a tax advisor or know your tax law.
- They offer extra riders with fees on purchase, that vary by state. I am not commenting on whether any of the riders are worth the fees.
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11 Comments
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Also, when you do, most good investment advisors will have a kneejerk negative reaction to the word "annuity". They are usually high-fee, iffy investments pushed by insurance agents to pump up their commissions. You will have to explain that this is a fee-free, direct-to-consumer product that isn't like traditional lifetime-based annuities.
I see this as potentially attractive to older folks who have lower-risk investments like bonds and CDs in their retirement portfolios, as this can pay better than bonds or CDs.
Why wouldn't you? They said they "guarantee" to pay you back!
Now, instead of the deadbeat in your head being a person, picture it as Puritan Life Insurance. They are the deadbeat. They "guarantee" to pay you back.
For me? HARD PASS!
It's not a scam, but it's riskier than it sounds.
Source: https://www.annuity.org/annuities...s-annuity/
Why wouldn't you? They said they "guarantee" to pay you back!
Now, instead of the deadbeat in your head being a person, picture it as Puritan Life Insurance. They are the deadbeat. They "guarantee" to pay you back.
For me? HARD PASS!
Though there may be some hassle involved if they do go under, isn't the aforementioned State level insurance on annuities enough to protect you against said deadbeat?
If they go under, there will be a hassle, but if you are in one of those states, they will back it.
Check your state guaranty association, because, indeed, this insurance company is not the best. I'd give a 2-7% chance you will need it.
It's not a scam, but it's riskier than it sounds.
Source: https://www.annuity.org/annuities...s-annuity/ [annuity.org]
But, if the contract is backed by your state (which you need to verify), that makes it close to zero risk. Puritan isn't huge - the state guaranty associations can afford the loss.
"Is Canvas Annuities Any Good?"
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"Is Canvas Annuities Any Good?"
It's not a scam, but it's riskier than it sounds.
Source: https://www.annuity.org/annuities...s-annuity/ [annuity.org]
There's a reason for that. Banks are allowed to advertise "FDIC Insured", and all of them do so.
Annuities and agents are not allowed to advertise "[YourStateGuarantyAssociation]-insured". States prefer to be the backer of last resort and want buyers to consider the financial stability of the insurance company.
I don't sell annuities, and am not an insurance agent, so I can mention it. In my state (Indiana) they cover me for up to $250,000 is Puritan becomes insolvent, although this can vary at the state level.
But, if the contract is backed by your state (which you need to verify), that makes it close to zero risk. Puritan isn't huge - the state guaranty associations can afford the loss.
For example, my state guarantee website says -
"Annuities and Structured Settlement Annuities
Present value of annuity benefits and structured settlement annuities, including cash surrenders or withdrawal values: $250,000
Participants in a government retirement plan covered by an unallocated annuity as described by NRS 686.C.035: $250,000"
It appears this should be covered up to 250K of accumulated value (principal + interest).
Am I right ?
For example, my state guarantee website says -
"Annuities and Structured Settlement Annuities
Present value of annuity benefits and structured settlement annuities, including cash surrenders or withdrawal values: $250,000
Participants in a government retirement plan covered by an unallocated annuity as described by NRS 686.C.035: $250,000"
It appears this should be covered up to 250K of accumulated value (principal + interest).
Am I right ?
Present value has a very clear meaning. It is principal plus interest-to-date (the present), but would not include future interest payments. That is the MINIMUM the guaranty association provides, and kinda sucks because you are out the future interest, and if it's retirement money, you have to reinvest it pretty quick (like 60 days) to retain it's tax-advantaged status.
However, the guaranty associations don't want to make a lump-sum payout of present value. They will attempt to find another insurer to take over the contract so there is no change in your terms. In most cases, they are successful, and you get your future interest. However, in some cases, they will fail - the contract may be too small or have too high an interest rate for another insurer to be interested, and they cash you out. But, guaranty associations state that they prefer to reassign vs. cash-out in the event of default.
Quote:
"guaranty associations will first attempt to transfer the policies at an insolvent institution to a healthy one, in which case paying out all the customers' claims is usually not necessary." ( www.annuity.org/annuities/regulations/state-guaranty-associations/ [annuity.org] )
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