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Multi-Year Guaranteed Annuity
also known as MYGA
What is a Multi Year Guaranteed Annuity?
A Multi-Year Guaranteed Annuity, or MYGA, offers a predetermined and contractually guaranteed interest rate for a certain period. A MYGA is a way to create an additional savings bucket for retirement to supplement Social Security benefits and other retirement assets. MYGAs rates vary from carrier to carrier and change regularly. MYGAs rates generally are higher than CDs rates, and they compound each year.
A MYGA would be a good option for someone in a low-yielding CD, or who just keeps sums of money in a savings or checking account.
A MYGA works by taking a lump sum of money to allow it to accumulate interest. At the end of the accumulation period, you can take the premium and interest earned, or you can renew the contract. If you choose to renew the contract the interest rates will likely differ from your original rate.
MYGA - Pros
➕ Safety - Principal is secure
➕ Flexibility
➕ Tax Benefits
MYGA - Cons
➖ May not outpace inflation
MYGAs vs CDs
Both MYGAs and CDs offer a guaranteed interest rate and a guaranty on the principal. Both products are conservative options to invest your money and have very few risks involved. With a lower risk also comes a lower reward, meaning they will not earn as much as other financial products might.
Differences between MYGAs and CDs
• CD is issued by a bank; a MYGA is issued by an insurance company.
• A CD is FDIC insured; a MYGA is backed by the state's guaranty association.
• A CD charges a penalty for taking money early; a MYGA may allow you to take out some money without incurring fees or penalties.
• CDs have lower interest rates; possible a MYGA may have more fees.
• A CDs interest rate is taxed each year; a MYGA offers tax-deferred growth
You can use a MYGA as a substitution for a CD, or you could incorporate both products into your financial portfolio.
Is a MYGA right for you?
As with any financial product, you need to access what your goals and objectives are.
MYGAs are more conservative in nature and are a good fit for people who do not like market volatility. They are potentially suitable for people who are highly adverse investors and those who are nearing retirement age and cannot sustain a big loss on their portfolio.
If I want to learn more about MYGAs, where do I begin?
Individuals interested in learning more about MYGAs should speak to a licensed financial professional for assistance. We would be happy to assist you on your retirement journey. Give us a call at 270-904-6070 for professional help today.
Safeguard Insurance, LLC
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Insuring your health, life, and retirement.
Phone: 270-904-6070
Email: education@safeguardky.com
1600 Scottsville Rd, Suite 100
Bowling Green, KY 42104
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