July 24, 2024
MYGAs: Earn with Certainty
A way to lock in a high interest rate for years.
Annuities are a common way for clients to save for retirement with tax advantages.
One type of annuity that’s very popular with clients today is the multi-year guaranteed annuity (MYGA), which lets them lock in a guaranteed interest rate for a certain length of time, for example, five years.
This may be advantageous for your clients when interest rates are high or when they have no immediate need to access their savings.
Key things to tell clients about MYGAs
√ Like a CD, a MYGA offers a guaranteed interest rate for a certain number of years.
√ Interest compounds annually, and savings grow tax deferred.
√ Savings grow faster when interest compounds without being taxable — this is the case with a MYGA until earned interest is withdrawn.
√ Multi-year guaranteed annuities are protected from market risk.
√ MYGAs offer access to cash, starting in year 2, with 10% penalty-free withdrawals.
√ Clients can set up systematic withdrawals for a specific amount ($500/month) or for the earned interest only.
√ MYGAs have withdrawal charges for early and/or excess withdrawals.
