How can people say that they “hate annuities” and love CDs at the same time? Short answer is they can’t. Multi-Year Guarantee Annuities (MYGA) are the annuity industry’s version of a CD (Certificate of Deposit). Both guarantee an annual % rate for a specific period of time that you choose. Both have no annual fees, and both fully protect your principal.
MYGAs do have one unique feature that CDs can’t provide. When using non-qualified (i.e. non-IRA) money, the interest earned with a MYGA grows and compounds tax-deferred. With CDs, you have to pay taxes on that interest every year in a non-IRA account. Eventually, you will have to pay taxes on money taken out of a MYGA…but the tax-deferral is a big deal for many people.
Both MYGAs and CDs can be used inside of an IRA (qualified $$) or outside of an IRA (non-qualified $$). The annual % guarantees are the same either way.
I have a live MYGA feed on my site that shows the best rates for your specific state of residence. You can shop at your leisure. No sign up needed, so click this link to see the best rates for your state. MYGAs are fixed annuities, and all fixed annuities are regulated at the state level…and each state approves MYGAs for sale in that state.
Currently, the shortest duration MYGA is one year, and the most popular is the 5 year time-frame. You can lock in MYGA rates as far out as 10 years or more, but current yield curve analysis shows value at the 5 year level.
No one on the planet can “time” interest rates, so laddering MYGAs is a popular strategy to having $$ maturing at different time frames. For example, a $300,000 MYGA ladder would have you buy a 3 year, 4 year, and 5 year MYGA each for $100,000.
At the end of a MYGA duration (i.e. surrender charge) period, you have the choice of getting all of your $$ back with interest or transferring to another MYGA to continue the tax-deferral. That annuity-to-annuity transfer is a non-taxable event.
I’ve written an Owner’s Manual on MYGAs that I would love to send you for free and under no obligation. Just click here to fill out your mailing address, and I will ship you a copy.