Multi-Year Guarantee Annuity:
Multi-Year Guarantee Annuities (MYGAs), also known as Fixed Rate or CD-type Annuities, are a type of fixed annuity that provide a pre-set and also contractually guaranteed interest rate for a specified period of time to the client, and they are most commonly 3-10 years. They are most commonly compared to Bank CD’s because they work in a similar way.
Individuals who choose to deposit their money into a principal protected MYGA can rest assured knowing the exact amount of interest their annuity is going to earn and the exact amount of time their funds will be in the Annuity, so they can plan and prepare for that number of years without the money available. Multi-Year Guarantee Annuities are predictable retirement savings products because the issuing insurance company cannot reduce the interest rate during the guarantee period and the rate is guaranteed for that time period as well.
To see a listing of the highest yielding MYGA interest rates currently available, please call our office and we are happy to go over the current rates with you, as they change month to month for the most part.
At the end of the initial guarantee period, the insurance company will typically offer a renewal interest rate. If the renewal rate offered is acceptable, the same annuity contract can be renewed and funds will continue to grow at that new rate. If the new rate is not acceptable, the carrier will offer a free withdrawal window where the insured is allowed to move funds to a higher yielding annuity with a different insurance company, via a transfer or tax-free 1035 exchange. There is also the option to choose to cash in the annuity without surrender charges, but the client needs to be aware of tax implications.
Additional Benefits of Multi-Year Guarantee Annuities
- Typically offer higher interest rates than Bank CD’s for the same term
- Interest earnings are tax-deferred when compounded -the money is guaranteed to grow
- Can be purchased with both non-qualified as well as tax-qualified IRA funds
- Liquidity options for penalty free and systematic withdrawals -one can “Get Income Now”
- Lifetime income options available – Guaranteed Future Income
- Principal guaranteed -no market fluctuations with which to deal
- Avoids probate, passing to named beneficiaries at death
- No fees, loads or sales charges -all of this is already built into the rate