Hi Forum,
Would love to hear your thoughts about creating a ladder as a bridge to delaying SS with each “rung” being 50% MYGA and 50% TIPS—a “MYTI Ladder”— if you will. Not sure if it would indeed be “mighty” or not but that’s why I’m posting. All funds would be from our IRA/401k’s so they would all be “qualified” and could be moved back from the MYGA into the IRA at the end of the contract period.
My rationale is as follows:
1) If I knew inflation in the coming years would be higher than the fed predicts, I’d buy 100% TIPS for the ladder.
2) If I knew inflation would be lower than the fed predicts, I’d buy Treasury Notes instead of TIPS
3) As I’m looking at the current yields on Treasury Notes maturing in the coming years and comparing the maturity year matched MYGA, the MYGA rates are consistently higher by about 0.5 - 1% with ‘A’ rated companies.
4) So, why not combine these tools like a double-stranded DNA helix Image may be NSFW.
Clik here to view.
(if you will excuse my geeky science metaphor) so that each “rung” is 50% inflation protected (through TIPS) against higher than expected inflation and is 50% protected against lower than expected inflation (with MYGAs instead of T Notes, only due to the higher yields of the MYGA).
5) I realize I would be introducing “insurance company solvency” risk by utilizing a MYGA for each rung instead of a treasury note. However, when I asked google if any US life insurance (not car or home) company with an ‘A’ (not A-, or B++) or higher rating has ever become insolvent, the almighty google said no. Bogleheads: I could use your help here—is that true?
6) My understanding is that each state has its own limit on insuring against life insurance company insolvency (I believe my state insures it up to $250k per carrier) so I’d obviously stay below that figure.
7) At rung maturity, my TIPS inflation adjusted principal and last coupon payment would be deposited into my IRA. Likewise, at the MYGA contract expiration, the compounded funds could be transferred back into my IRA.
8) I understand that the MYGA, unlike the T note or TIPS, would carry stiff penalties if I wanted to break the contract early. However, my plan would be to not end the contract early—just as I am planning to hold the corresponding TIPS to maturity and not sell it ahead of time on the secondary market at a potential loss. We’d have enough other liquid assets to sustain us through an unexpected large expense so I’m as confident as I can be that we’d be able to allow everything to reach maturity.
9) Specifics: we have $370k in a money market fund at Fidelity (FDRXX). Our rungs would be from retirement at age 62 in 2030 to (about) when we turn 70 in 2038. Each of the 9 rungs would be $70k split 50/50 between the MYGA and TIPS vehicles. I was thinking of buying the 2030 TIPS this year at auction along with the 2035 TIPS. 2031-2034 TIPS would be bought on the secondary market and each year we’ll have $70k more contributed to the IRA so we could purchase the remaining 2036-2038 rungs yearly at auction over the next few years. This way, we’d avoid the task of trying to buy duration-matched TIPS to cover the “TIPS black hole years” (which TIPSladder.com actually seems to handle quite well). The maturity matched MYGA we’d then likely buy at the same time that we buy each $35k TIPS.
OK, what am I missing, misunderstanding, or not considering with this potential strategy. Any thoughts?
Thanks for your help!
Atticus713
Would love to hear your thoughts about creating a ladder as a bridge to delaying SS with each “rung” being 50% MYGA and 50% TIPS—a “MYTI Ladder”— if you will. Not sure if it would indeed be “mighty” or not but that’s why I’m posting. All funds would be from our IRA/401k’s so they would all be “qualified” and could be moved back from the MYGA into the IRA at the end of the contract period.
My rationale is as follows:
1) If I knew inflation in the coming years would be higher than the fed predicts, I’d buy 100% TIPS for the ladder.
2) If I knew inflation would be lower than the fed predicts, I’d buy Treasury Notes instead of TIPS
3) As I’m looking at the current yields on Treasury Notes maturing in the coming years and comparing the maturity year matched MYGA, the MYGA rates are consistently higher by about 0.5 - 1% with ‘A’ rated companies.
4) So, why not combine these tools like a double-stranded DNA helix Image may be NSFW.
Clik here to view.
(if you will excuse my geeky science metaphor) so that each “rung” is 50% inflation protected (through TIPS) against higher than expected inflation and is 50% protected against lower than expected inflation (with MYGAs instead of T Notes, only due to the higher yields of the MYGA).5) I realize I would be introducing “insurance company solvency” risk by utilizing a MYGA for each rung instead of a treasury note. However, when I asked google if any US life insurance (not car or home) company with an ‘A’ (not A-, or B++) or higher rating has ever become insolvent, the almighty google said no. Bogleheads: I could use your help here—is that true?
6) My understanding is that each state has its own limit on insuring against life insurance company insolvency (I believe my state insures it up to $250k per carrier) so I’d obviously stay below that figure.
7) At rung maturity, my TIPS inflation adjusted principal and last coupon payment would be deposited into my IRA. Likewise, at the MYGA contract expiration, the compounded funds could be transferred back into my IRA.
8) I understand that the MYGA, unlike the T note or TIPS, would carry stiff penalties if I wanted to break the contract early. However, my plan would be to not end the contract early—just as I am planning to hold the corresponding TIPS to maturity and not sell it ahead of time on the secondary market at a potential loss. We’d have enough other liquid assets to sustain us through an unexpected large expense so I’m as confident as I can be that we’d be able to allow everything to reach maturity.
9) Specifics: we have $370k in a money market fund at Fidelity (FDRXX). Our rungs would be from retirement at age 62 in 2030 to (about) when we turn 70 in 2038. Each of the 9 rungs would be $70k split 50/50 between the MYGA and TIPS vehicles. I was thinking of buying the 2030 TIPS this year at auction along with the 2035 TIPS. 2031-2034 TIPS would be bought on the secondary market and each year we’ll have $70k more contributed to the IRA so we could purchase the remaining 2036-2038 rungs yearly at auction over the next few years. This way, we’d avoid the task of trying to buy duration-matched TIPS to cover the “TIPS black hole years” (which TIPSladder.com actually seems to handle quite well). The maturity matched MYGA we’d then likely buy at the same time that we buy each $35k TIPS.
OK, what am I missing, misunderstanding, or not considering with this potential strategy. Any thoughts?
Thanks for your help!
Atticus713
Statistics: Posted by Atticus713 — Thu Jan 09, 2025 4:26 pm