Multi Year Guarantee Annuities (MYGAs) – The Annuity Industry’s Version of a CD
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Hi, this is Stan The Annuity Man. Welcome to my webinar. We’re calling it STAMinars because STAM is Stan The Annuity Man. We’re talking about Multi Year Guarantee Annuities, M-Y-G-A-s: Multi Year Guarantee Annuities. I call them fixed rate annuities. It’s the industry’s version of a CD. I doubt if you’re going to hear much about this from your agent or advisor. These are the lowest commission products on the planet, but I love them. I think they’re very pro-customer so let’s get started and get into it.
A little bit about me, if you don’t know me, I am the walking middle finger of annuity truth. Laugh. That’s when you need to giggle.
- I’m the top independent agent in the country.
- I’m licensed in all 50 states.
- Published seven books. I’m working on number eight right now!
- I have published over 400 articles in every single place you could imagine from Wall Street Journal on down.
- Obviously, writing is therapy for me, but I do believe in education. If you are a client or you’ve dealt with me, you do understand that this isn’t some sales pitch. We talk about it as grown-ups. We see if it fits and then you make your own decision.
Here’s the books that I’ve written:
- An Index Annuity Owner’s Manual was published earlier this year. It took me a long time to write. I was vomiting in between writing it because it’s been the most over-hyped product on the planet, CD product, but index annuities so we wrote one on that.
- “QLAC,” the first book I wrote was QLAC, The Owner’s Manual.
- “Immediate Annuities” the granddaddy of all annuities.
- “MYGAs,” which we’re going to talk about today, but yes, I’ve written an owner’s manual on that, and I’m going to encourage you to order that from me for free. I’ll ship it to you. Nobody will show up at your doorstep or call.
- “Income Riders,” which are attachments to income guarantees. They’re attached to variable and indexed annuities. It’s such a complex and mis-sold product and benefit that I wrote a book on it.
- “Deferred Income Annuities,” which is an immediate annuity for later. Wrote a book on that.
- The granddaddy of all books, “The Annuity Stanifesto,” which was published a while back. The original therapy session, which covers pretty much everything, and it’s been out, a best seller on Amazon for a long, long time. You can email me. You can contact me anytime, and I will get back to you personally.
Here’s a picture of what I looked like early when my kids were nice to me. This is what I look like now that my kids are in college. If you have kids that are growing up, that’s the future. That’s the midlife crisis. So, you can email me anytime. I do respond to emails, or call me. I am the only agent: Stan The Annuity Man. There is no Junior Stan The Annuity Man or Stanyelle The Annuity Woman. There’s nobody like that. It’s just me. I do have a great staff that supports everything that I do, but if you’re going to talk about annuities or make a decision to buy one, you’re going to talk to me.
My saying is “Will do. Not Might Do.”
You want an annuity for what it will do, not what it might do, which means focus on the contractual guarantees only. We do not look at hypothetical, theoretical, back-test, projected, agents’ hopeful return scenarios. I’m not like most of the indexed annuity, sociopathic, gun-slinging agents out there, where if you have a sprained ankle or the flu or a flat tire, an indexed annuity is their solution. We do look at contractual guarantees, and I am going to tell you if you don’t need an annuity. I have no problem doing that if you tell me your situation, and it doesn’t fit.
I’m big on that. Obviously, annuities are only as good as the claims paying ability of those companies backing them up. I give away for free because I’m a philanthropist and a giver on my site COMDEX Rankings. You say, Stan, COMDEX. What the heck are you talking about? COMDEX is a compilation, and a listing of all four rating services, which is A.M. Best, Standard & Poors, Moody’s, and Fitch. If you go to my website, go to resources and click down, you’ll see COMDEX Rankings. At the very bottom, you’ll see download your free COMDEX report. You can do that. You don’t have to sign up.
And here’s what it looks like (you see a chart):
It will show you the company (name on the far left, then the state) the ratings; A.M. Best, Standard & Poors, Moody’s, and Fitch (one column per rating service) Then there’s a COMDEX ranking (on the far right).
What’s a COMDEX ranking?
It’s a score from one to 100: 1 is terrible/100’s really good. We all understand that. Nobody understands AA, AAA. It sounds like a bunch of drunks. It’s one to 100 for goodness sakes. You understand it. We update this every month. Let me just tell you. Every single advisor and bank and brokerage firm’s using my service with this. It’s amazing to see how many people log on to get this. I’m glad they’re doing that because they’re looking at the claims paying ability of these issuers. So with MYGA do the same thing. If you choose a MYGA and I have a look at their bond holdings and solvency ratio and I don’t think they’re a good deal, or it’s sketchy, I’ll tell you. I mean I have that background with Morgan Stanley, Dean Witter, PaineWebber, UBS. I used to do all that, so I understand looking at the bonds that they hold, etc. COMDEX rankings are very, very important.
It doesn’t seem to be known there are a variety of annuity products to choose from.
I know that you can turn on the TV and you see I hate all annuities ads. That’s like saying, “I hate all restaurants.” That’s just ridiculous. There are many annuity types. Not everybody needs an annuity. I blame the annuity industry, but everybody out there for whatever reason thinks an annuity works like, “Hey, I get this annuity. I get a lifetime income stream and when I die the insurance company keep the money.” That’s just ridiculous. That’s like going to a restaurant and saying, “There’s only one thing on the menu.” With what we’re talking about today, which is MYGAs, you don’t lose control of the money. It’s not an income situation. It’s the industry version of a CD.
All annuity solutions can be summed up with two questions:
What do you want to money to contractually do? And, When do you want those contractual guarantees to start? How you answer these questions determines what product you should look at.
With a MYGA, the answer to the questions “What do you want the money to contractually do?”
- I don’t want to lose a penny.
- I don’t want to pay a fee.
- I just want a guaranteed interest rate.
- ”When do you want that guaranteed MYGA interest rate to start?”
Now. I’d like to get that interest now, and I’d like to lock it in for a specific period of time. Then, those are the two answers that indicate for MYGAs.
There are four places annuities, in general, fit into your portfolio: legacy, income, long-term care, and safety.
Notice there’s not market growth. Now I am a contrarian, but I’m also a factual contrarian. Every gun-slinging, sociopathic agent out there (Grifter), is trying to say market upside with no downside with indexed annuities, which is a joke. Or they’re trying to do variable annuities, which are an insurance wrap-around mutual funds. But I truly believe that annuities should be bought for their contractual guarantees, the “Will do. Not might do”, worse case scenarios. They’re contracts, not investments. If you want market growth, go buy something else. Don’t buy an annuity so legacy, income, long-term care and safety.
I have come up with a very easy to understand acronym because annuities are just transfer risk products. The acronym’s P.I.L.L.
So, if you need an annuity, see if you can take the P.I.L.L. What’s the P.I.L.L.?
- P is principal protection.
- I is income for life.
- L is legacy, and the other
- L is long-term care.
P is principal protection: So you want to protect the principal, but you don’t want to lose control? Great. That indicates a MYGA, Okay?
Income for life, there are products that do that.
Legacy there are products that leave money to your beneficiaries that are annuities and then
Long-term care is self-explanatory.
If you do not need to solve for one or more of these: P.I.L.L., then you do not need an annuity. It’s that simple.
Where do MYGAs fit? They provide principal protection.
They’re the industry’s version of a CD. We’ll go over later the difference and the similarities between them, but if you say, “Stan, explain MYGAs to me.” You ever bought a CD? Yeah. That’s it. You buy a MYGA, you get a percentage for a specific period of time.
MYGAs, Multi Year Guarantee Annuities, are also called Fixed Rate Annuities
The industry creates these products that no one knows about, and then also these acronyms no one knows what they are. These are fixed-rate annuities, not fixed-index, people. Don’t let your heads pop off. Fixed-rate. Self-explanatory. It’s a fixed rate.
Where are the five safest places for your money (where your principal is fully protected)?
Does anybody know? Probably not or probably you do when you see this list, you’ll get it. I know the conspiracy. Take your tinfoil hats off for a second because no conspiracy theories allowed.
- US Treasuries.You might say, “Well, Stan, but what if?” No, no, there’s no what if. US Treasuries are the safest money on the planet. Period.
- CDs. Why? FDIC. Federally-backed. F stands for Federal, which means they can tax us into oblivion and confiscate our money to back it. CDs.
- Money markets. That’s a safe place for your money … I know your little conspiracy theories out there, but I’m telling you this is the top three.
- AAA/AAA Insured Municipal Bonds.
- What’s the fifth? Guess what the fifth is. MYGAs! That’s exactly right. MYGAs. So: US Treasuries, CDs, Money Markets, AAA/AAA Annuities and MYGAs-Fixed Rate Annuities are the five safest places for your money, meaning that your principal is fully protected.
Why should MYGAs be a part of your portfolio? Let’s take a look at some reasons:
MYGAs get contractual guaranteed annual percentage rates. -It’s not a hypothetical/theoretical amount, it’s a percentage rate. It’s contractual. You look at it in your policy. That’s what it’s going to be. Period. A MYGA compounds tax-deferred in a non-IRA account. -So, if you bought a Multi-Year Guarantee Annuity in a non-IRA account, the interest is going to compound tax-deferred. Now when you take the money out, obviously you have to pay taxes, but that’s a good deal if you’re just looking to park money and not pay taxes. This is one of the biggest differences between a CD and a non-IRA account, and a MYGA and a non-IRA account. With CD and a non-IRA account, you have to pay taxes on that interest. With a MYGA, you do not. No annual fees.
All commissions are built into annuity products. -Obviously, the agent gets paid, but not a lot. Because MYGAs are so simplistic and so short term, the commissions are low. That’s a good thing.
MYGAs have no annual fees.-period.
You get full control of your money.-You’re not going to lose a penny at the end of the term. You get all your money back, if you want to. MYGA terms are as short as three years. -At the time of this STAMinar, the shortest term you can go is three years. I’ve seen them in the past as short as one and two years, depending on where the interest rates are. Right now, the shortest term is three years.
You can ladder MYGAs for capturing potential rising interest rates. -People always say, “Well, Stan, is it a good time to buy?” I don’t know. Nobody knows. Janet Yellen doesn’t know. I mean-nobody knows! If you aren’t sure, then put a ladder in place. I just did a ladder for a very nice gentleman in Colorado, a real estate developer. We did a three, four and five year ladder, so we had three year paper, four year paper, five year paper. We have paper coming due and maturing starting in year three. Hopefully, rates will be rising and we’ll go capture higher rates at that specific time.
MYGAs have 100% principle protection
In some states, like Florida and Texas, MYGAs work as creditor protections. -Some predator trying to sue you frivolously cannot get to your MYGAs. They can’t get to your IRAs, but they can’t, with some states, there’s laws in place where if you have these annuities, they can’t get to them. MYGAs are a really great place to park your money for protection. I have a lot of entrepreneurs, doctors, or people like that who really don’t need to make lot of money on their investments. They just need to not lose any. MYGAs in my opinion are bunt singles. Not a bad deal to do that especially if you’re a target with a high net worth.
What are the choices when a MYGA term ends? At the end of the term of a MYGA, you can do a few things:
You can transfer to another MYGA via direct transfer. If you don’t need the money, and you just want to keep pushing the tax puck down the ice, you can transfer to another MYGA.
If it’s an IRA, you can go IRA to IRA, a non-taxable event.
If it’s a non-IRA account, you can do what’s called a 1035 Transfer. -1035 refers to the IRS code. Within the IRS code, 1035 annuity to annuity is a non-taxable event.
You can also choose to annuitize at the end of the term. -You don’t have to, but there is an option to create an income stream for life, if you want to. If you want to do that just tell me, “Stan, I don’t want to transfer this MYGA to another MYGA. Me and the wife want an income stream.” I’ll go out and shop the highest paying Single Premium Immediate Annuities (SPIAs). Then we can do a 1035, or direct transfer to that SPIA. It’s a non-taxable event, and creates a lifetime income stream, and get the highest contractual guarantee. You do not have to do this, but this is an option. If you’re a CD or a bond buyer, truly MYGAs are a no brainer. MYGAs are just what you’ve been doing. It’s just a product you weren’t familiar with.
How should MYGAs be used in your portfolio?
We’ve covered a little bit of that, i.e. full principal protection. Typically & historically, you see a fixed rate annuities provide a better guaranteed interest rate than a same term CD.- So, a five year CD is beaten by a five year MYGA in those cases. Or a three year CD is beaten by three year MYGA. I’m not saying they’re better than CDs. I’m just saying that’s the way it is. If you’re really looking for yield, it’s OK to combine CDs and MYGAs. Just go shop for the best ones. I mean if you said, “I’m going to shop for the best rates on the planet. I’m going to use Stan The Annuity Man’s site for MYGAs, and I’m going to use bankrate.com for CDs.” You’re going to get the highest contractual guarantees.
You should use MYGAs in combination with CDs, bonds, money markets and Treasuries.
MYGAs should be part of the fixed-income section of your portfolio. You should look from a tax-deferred accumulation ONLY viewpoint. -MYGAs are a really good way to contractually grow your money. I mean interest rates are at perceived lows right now. We all remember Jimmy Carter, but he’s not in office. I doubt if we’ll see those interest rates again. This is a very simplistic, easy way to grow your money
I always recommend laddering strategies. Right now the most popular laddering strategy we do is a three, four, and five year ladder; mixing three year, four year and five year MYGAs. We’re not trying to guess. We’re not trying to be Svengalis. We’re not trying to be Masters of the Universe. We know the interest rates could go up, so if they do we want money coming due so to capture them. So that’s what we’re doing; three, four, and five.
If income is needed in the future, we can do a transfer from a MYGA to a SPIA (the Immediate Annuity-if income is needed, that’s where it should be used). You can buy a MYGA Stand Alone or a MYGA Ladder
You can buy one MYGA standalone. -You can buy just a single carrier. You could ladder MYGAs. -We typically use multiple carriers for that, because annuities are commodity products. Not one carrier has the best interest rate for a specific term. That’s the reason all of them have to be shopped. That’s the great part about the feed on my website, which we’re getting ready to show you.
Right now, three years is the shortest term, which is fine. It is what it is. If you want to go shorter than that, buy CDs.
Five year is currently, the most popular. The reason for this is that’s where the value is, or the yield curve. Anybody out there doing yield curve analysis understands. It’s pretty basic. If you go to my feed, I’m going to show you how to do that. Just where are the interest rates? Is a 10-year paying enough in interest to warrant locking your money in for 10 years? In my opinion right now-no.
There are no annual fees, and there will be no annual fees, even if you transfer it to an immediate annuity for income because immediate annuities also have no annual fees. What happens when you transfer money that comes due from a MYGA into a SPIA? You are annuitizing that sum.
The MYGA to SPIA, let’s go over that a little bit. All annuities, all deferred annuities like variable annuities or indexed annuities or MYGAs/fixed rate annuities can be converted into a lifetime income stream. That’s called annuitization. Annuitization is creating a lifetime income stream. MYGAs, you can do that. Let’s just say you’ve got a five year MYGA contract, and it’s paying you 3%. At the end of the five years you say, “Stan, let’s convert that to income.” We’ll go to that MYGA carrier and say, what’s your annuitization quote? We see what it is. Then what I do is, I’ll go back out into the market since I represent every single carrier on the planet, and I will put in your parameters saying, “Let’s go get the highest contractual guarantee.”
We shop all SPIA carriers for the highest contractual income for your specific situation.
We go get it for you. You can annuitize and customize that strategy anyway you want. You can do joint life. You can do single life. You can do cash refund or installment refund. You can tell me exactly how you want that income stream.
You don’t have to annuitize by transferring your MYGA to a SPIA, but it is an available option. -I’m telling you that it’s an option that most people aren’t aware that they can choose to do with their MYGAs.
There are tax advantages to moving your MYGA to a SPIA-the exclusion Ratio with SPIA vs. LIFO (Last In First Out) with Riders.
Typically, 99% of the people that buy MYGAs buy them for the interest rate and that’s it. They don’t want income in the future, but it is an option and there are some good tax advantages. The income has applied exclusion ratios- parts of the payment coming to you are excluded from taxes. If you want to do that, that’s fine so we go find the best contractual pay out at that point. This is just an option that must people aren’t aware of, and you do not have to do it.
Transferring from a MYGA to a SPIA is a non-taxable transfer.-The cost basis of the MYGA will transfer to the immediate annuity. It’s a very, very efficient way to create lifetime income, after the accumulation period. You’re going to get interest that you can go and turn it into income. It is an option.
We have a new MYGA feed on the Stan The Annuity Man website!
Let’s look at that MYGA feed. I’m very proud of this. We’ve spent a lot of money on this. Currently, at this taping of this live event that we’re doing (we’re also taping for replay), we are the only company offering this live feed to the consumer. Most of the rates you’re getting from other sites, they’re using our site to get the rates and then they post them on their site. That’s fine. It’s all good, and it is what it is. This is a live feed. We filter by your state and let me stop right here.
All annuities are approved at the state level.
In other words, XYZ Annuity Company has to go to each state and get that product approved or that MYGA approved so each state’s going to be a little different on what’s being offered and what’s there. What’s in Texas might not be in California and that might not be in Florida or Colorado.
- You filter by your state
- You filter by your term
Then the website feed will list the highest yield to maturity during that time, and it’ll show the liquidity options, etc. The columns that we’ve decided to include, and we can dig as deep as you want to in these MYGAs. If you said, “Stan, I’m really interested in XYZ.” We can get you the specimen policy, the marketing stuff, whatever you want, we can get it to you and dig as deep as you want to go.
After filtering out by state to find what carriers are represented in your area, we show on the MYGA feed:
- The A.M. Best rating.-Even though we also provide COMDEX (rankings on the Stan The Annuity Man website, which include A.M. Best ratings as part of the COMDEX compilation ranking system), but on this filter we show A.M. Best rating.
- We show the product name.
- The years a product is guaranteed
- The minimum and the maximum premium amounts
- Liquidity provisions-if that’s important. I don’t think you should be buying MYGAs for liquidity, but some of you need to peel off the interest for income, and that’s fine. We’ll choose those carries accordingly.(Interest withdrawal allowed?/Cumulative Interest withdrawal allowed?/Account Value 10% withdrawal allowed?/1st Year rates if different)
- The guaranteed interest rate, and then it also shows the date that rate was set. How do you use the MYGA Feed?
Let’s look at what that looks like so if you go to my site, man, that’s a good-looking picture (go to www.stantheannuityman.com if you are viewing text only here). That is me at my happiest. That’s me when both daughters went to college. Man, I was ecstatic. You see the hand there? See the hand? Click to View the MYGA/Fixed Rate Feed for your state. Click that. Here’s what it’s going to show you. It’s going to show you a drop down. You’re going to choose your state. In this case I’m indicating you are from Florida, since I’m doing this from Ponte Vedra Beach, Florida where the Stan The Annuity Man, mothership is located. We’re located south of Jacksonville and, north of St. Augustine.
We hit Florida. Then the next drop down.you choose is years. -We hit five years, so those are the two things you hit. You hit okay. There it goes. It takes you to the best five year products available in the state of Florida; company name, A.M. Best, product name, years guaranteed. That’s what GTD means-guaranteed. The minimum premium they need. The maximum premium they’ll take. If they’ll take interest out, if you can take interest out, if you can take cumulative interest out, if you can 10% out. Then, just a handful of these products will have a higher rate the first year and then the rest of the time the same, but yields are surrendered. The big green column is the one you need to focus on because that’s what you’re going to get, on average. Obviously, at the bottom right, you can always schedule a call with me and that would be a great event for both of us because it’s not some sales pitchy stuff. It’s me and you talking about life. So you might be saying, “Hey, Stan, forget Florida. I want to look at another rate.” You go up (to the top right corner of the page). See the change my guaranteed period or state button up top? Right there. See that? The hand just went there. Isn’t that magic? Click that. It’ll take you back to that drop down and let’s just say I’m going to check on Aunt Martha in Austin, Texas. Let’s see what Aunt Martha can buy, so we do Texas. Martha’s old as dirt so we’re going to do three years, shortest as we can. There’s the best three year products in the state of Texas for Aunt Martha. It’s that simple. If you want to look up another year or another state, go back up to change my guaranteed period or state. It’s that simple.
What did Steve Jobs say? He said, “The most complex thing in the world is to create something simple.” Here we go. Bing, bing, bing, bing. We did it and I want to thank people that know: Leah, is part of our staff and been with me forever. She was the project manager on this, and she did a fantastic job putting this together and making it easy to understand. You don’t have to sign up for anything. You can just go to my site and look at it anytime. You say, “I wonder what the rates are?” Boom! You can go look at what the best rates are.
That’s the new MYGA feed. How about that? And live. It’s been updated all the time. We have a couple of sources that we pay too much money to these people. These corporations are just getting rich feeding us this information, but it’s really important, and I think it’s good for the consumer.
What are the benefits and limitations of MYGAs?
With that being said, let’s look at the benefits and the limitations of MYGAs because every product, every annuity product has good and bad aspects. I love these guys at the bad chicken dinner seminars. I sell a vomit bag on my site. If you go to my site, under AnnuityMan Store, I literally sell a vomit bag that you can take to the bad chicken dinner seminar, so when they get really going you can throw up in it. It’s really cool. It says Preventing Vomitility, but off the subject, I digress.
What are the basic MYGA benefits?
- Full principal protection.
- MYGA rates are typically higher than the same term CDs. I know you’re saying, “No, that can’t be, Stan.” It is. Just trust me on that or don’t trust me. Go to my site and pull them up, and then go to bankrate.com pull you up same term and say, “Dog-gone-it, that Stan The Annuity Man is right.”
- Contractually guaranteed annual interest rate. In other words, for the term you choose, you’re going to get that interest rate. Period. Will Do. Not might do.
- These things can be purchased in traditional IRAs, Roth IRAs and non-IRA accounts.
- They can be held in all accounts.
- They’re easy to understand with no moving parts.
- The interest rate gains grow and compound tax-deferred in a non-IRA setting.
- There’s no annual fees.
What kind of commissions are paid on MYGAs?
Going back to the commission thing. We do get paid a commission, agents do, but it’s built-in. We reveal that to you. We’re very transparent. You know exactly what I’m making, but it’s low. That’s the reason that you don’t see MYGAs being pitched at bad chicken dinner seminars. They couldn’t afford the chicken. They’d just serve coffee and there’d be no creamer. It’d just be black because there’s no commission in it.
There are penalty-free liquidity choices depending on if you want liquidity. You saw the feed, you can choose an annuity that provides liquidity, and the interest compounds tax-deferred.
What’s the downside of MYGAs?
What are the limitations of a MYGA? Of course, they have limitations…every product has a limitation, except if you listen to The Index Annuity Guy because those solve the flu, the plague, all kinds of things. That’s an amazing product if you listen to the sales pitch. I digress. Index annuities are really CD products, but MYGAs historically out-perform. In a lot of cases, if you look MYGA to index annuity, MYGAs beat them. Why? Because MYGAs give you a guaranteed rate every year.
It’s not a stock market growth product. If you’re looking for five, six, seven, eight, nine percent, don’t buy it. Do not buy it. Don’t buy any annuity for that matter, but when the 10-year Treasury is at 2.whatever%, there is no 5%.
MYGAs do have high surrender charges with limited liquidity. The surrender charges will be revealed during the process, on the application etc., but they are high. If you get out, if you buy a five year and decide to cash the whole thing out in year two, they’re going to ding you. I mean they’re going to ham you for doing that. Shortest term currently is three years. Boy, I wish it was shorter, but it’s not. That’s a limitation.
Not all annuity companies offer MYGAs. People say, “Well, Stan, I only want to buy New York Life MYGAs.” Good luck. Right now they’re not in the game. Great company. I love them. Or say Guardian. “I just want to buy Guardian. I just want to buy Pacific Life.” Or whatever company you love or love their marketing. You can’t look at it like that. You have to choose the highest contractual guarantee and then filter by the claims paying ability.
When you take money out of a MYGA, it’s taking that last in, first out. That’s what LIFO stands for: last in first out. And tax ordinary income levels.
The guarantees are by the company. You have to make sure the company can back up those claims.
IRA, non-IRA account. You can put these MYGAs in any type of account:
- Roth, Traditional, non-IRA can hold them.
- Most of these MYGAs are RMD friendly for traditional IRAs, but if you do plan on taking required minimum distributions from the MYGA that you’re going to buy in your IRA, please let me know that, so we can make sure that the MYGAs is RMD friendly.
- You can set up single, joint, or trust ownership is allowed. You just have to let us know what your plans are.
- You can have beneficiary designations that are revocable. So if Junior makes you mad, goes to college, doesn’t go to class for a full semester and parties, you take him off the beneficiary list. You can do that. So revocable beneficiary designations are available.
- The accumulation value, which is principal plus interest, is the death benefit. So if your Learjet hits the mountain, they’re going to get to the principal plus the interest as a death benefit.
There are the three choices at the end of the MYGA term.
So let’s say, “Hey, Stan, we’re going to buy a five year MYGA. What happens at the end of the five year? What are my choices at the end of those five years?”
You can cash out the MYGA at the end of the MYGA term You can say, “Hey, Stan I want to cash out. Send me the check, son. Send it to me now. FedEx that baby.” We’ll do it. It’s going to be principal plus interest. You can do that. Or you can say, “Hey, I bought in this IRA, I don’t want to buy another MYGA. Just cash it in and transfer it over here, so I can trade stocks. Or it’s in a non-IRA setting. “Hey, Stan, cash it out. Send me the check.” Great, we’re going to do that. You’re going to pay taxes on the interest. Does that makes sense?
Yes. Nod your head.
You can transfer to another MYGA (which is a non-taxable event) at the end of the MYGA term.We can do that. Remember: That can be either IRA to IRA direct transfer, or It can be an IRS approved 1035 transfer.-What is the 1035? 1035 is a section of the IRS code. All you geeks out there who have nothing to do and want to read the IRS code, go ahead and read Section 1035. It talks about transferring annuity to annuity as a non-taxable event. Both of these options are easily done, institution-to-institution transfers.
You can annuitize it, which we talked about (create an income stream with your current MYGA contract or transfer to the highest paying SPIA by shopping all carriers). You don’t have to do that, but that is an option.
MYGA to SPIA. Let’s go over that one more time.
- No annual fees
- Pure taxed deferred compounding growth
- Transfer $ to a SPIA or the best annuitized contractual guarantee. Just put that in the back of your head, it’s not a bad way to look at future income, but still have full control of the money.(it’s a non-taxable event transfer -1035 or Direct-, lock in SPIA rates at the time of transfer, and Tax-preferable income-exclusion ratio/NQ).
- MYGA percentages are typically higher than CDs.
The 10 year Treasury is the benchmark. -Let’s look at CDs and MYGAs and how they can work together as well. The bogey that you need to look at it. You need to get up every morning say I’m going to check rates. You check the 10 year Treasury. At the time of this STAMinar (09.26.17), interest rates are in the twos, between two and whatever. So when you call me and say, “Stan, I want a 5%, five year.” Then you’re dreaming. You have no concept of reality because it’s all based upon the 10 year Treasury.
Five year MYGA guarantees are typically more than the US 10 year Treasury. -Right now at the time of this STAMinar (09.26.17), the five year guaranteed MYGA is between 3 or 3.1 or 3.2%, depending on the carrier. What’s the 10 year Treasury rate? It’s around 2.3, 2.4%, whatever. I’m not saying MYGAs are better than Treasury. Treasury’s are the safest money on the planet, but that’s typically what you’re going to see, that type of ratio and that type of correlation to rates.
The reason you even look at MYGAs is if you can do better with a MYGA than a CD. -That doesn’t mean you don’t do CDs. If you feel more comfortable with your CDs at the bank, then buy the CD at the bank. Go with what you feel comfortable with. What I want you to understand is MYGAs give you another opportunity to lock in rates and typically, a little bit higher rates.
Right now the current yield curve shows five year being the best rate. -Go back to the grid and do this after the webinar.-Go back to the live feed, pull up your state. Put in five years and then put in six years, then put in seven years, then put in eight, nine and ten, and you’ll see what I’m talking about. The sweet spot, the value is at five years, currently. That might change, but currently, that’s where the value is. Listen to the street.
You can combine CDs and MYGAs.
If your time frame’s two year or less, buy CDs. If it’s three years or more, probably buy MYGAs because three years is the shortest term. So when looking at the combining the CDs in the MYGAs you can look at a CD and MYGA combo ladder as an example. This is just easy to understand. You get:
- 6-month CD for 50,000
- 12 month CD
- 24 month CD-It (the premium) doesn’t have to be 50K. This is an example.
- 3 year MYGA
- 4 year MYGA
- 5 year MYGA.
You should buy the MYGA based on the company that’s issuing the policy.
If you’re shopping Stan The Annuity Man, and bankrate.com, if you’re shopping both of those, you’re going to get okay coverage, not FDIC coverage. This is very important. Do not allow any agent to say, “Well, State Guaranty Funds are just like FDIC.” They’re not. F is Federal. F means they get to tax us for the money. FDIC coverage is the best coverage for these type of products. MYGAs are protected by the State Guaranty Funds. If you want to go check on your state guaranty fund, you can. There’s a website, nolhga.com. You can pull up your state.to see what they guarantee each policy up to a specific limit.
I wouldn’t put a lot of faith in that, in my opinion. It’s never been tested, and you can’t use the State Guaranty Fund as part of the sales pitch. I only show it to you because people always ask me because they’re always being pitched by somebody about the State Guaranty Fund. No. It has nothing to do with anything. Is it there? Is it good that it’s there? Sure, it’s good that it’s there, but with that being said FDIC is better coverage then State Guaranty Funds.
MYGAs pay low commissions to the agent, so they aren’t as popular as higher commission products. The DOL rule could change this.
One of the reasons you might not be aware of MYGAs until now is this basic. You probably already figured it out MYGAs pay the lowest commissions. I’m going to tell you right now I’m a big proponent of the DOL rule. I think the DOL rule should go through. Obviously, anything that gets to Washington, by the time it comes out of Washington it’s all screwed up. We’re seeing that happen with the DOL Fiduciary rule, but the way to solve the annuity issue is to make all commissions the same on all annuity types. That will never happen, but if I was annuity czar that would happen, but a MYGA is typically offered the lowest commission so agents don’t show them.
Most agents are trying to sell you the dream.
The dream returns non-guaranteed, hypothetical/back-tested numbers or percentages on variable and indexed annuities, which are high commission, high fee products. It’s unfortunate, but it’s just the way it is. That’s the reason that they don’t show you MYGAs. MYGAs to me are just a simple, efficient, pro customer product.
Discover once again the rational reasons to consider MYGAs.
- You don’t want to lose a penny.
- Contractual guaranteed annual percentage
- Full principal protection & total control
- Tax deferral in non-IRA accounts
- Annual guaranteed growth in IRA accounts
- No annual fees.
MYGAs are Will Do.
They’re full principal protection.(and guaranteed annual % return) Annual liquidity on some Better than CD returns. They are what they are.
MYGAs are commodities.
MYGAs are approved by each individual state for sale in that specific state.-Each state has approved different annuities that are for sale. That’s the reason we have the state filter, so you shop for the highest rate.
Shop for the highest MYGA rate & term in your state.
You filter your MYGA buying decision on carrier strength and claims paying ability and understand that you’re looking for that yield to surrender number that’s where you’re going to focus, so you need to shop all carries, and I represent pretty much all carriers. There’s not one carrier that’s better than the other. There’s not one offering that’s better than the other.-Understand that annuities in general all types are commodities, meaning there’s not one that’s better than the other. You should shop for them. You should shop for MYGAs the same way you shop for a plane ticket.
How many of you go to Orbitz and buy a plane ticket or Priceline or whatever those little sites are that you can go and filter. Nobody goes and says you know what? I really want to fly Delta or American or JetBlue or whatever. No, they punch in where they want to go, and they look at the price. That’s exactly how you buy annuities: you put in the specific parameters that you want, you shop all the carriers, you choose based on the highest contractual guarantees. It’s just like buying a plane ticket. Go to Orbitz to buy the plane ticket, go to stantheannuityman.com to buy your MYGA. Remember the hand on the website? Click to View the MYGA/Fixed Rate Feed. That’s how easy it -is.
Order a MYGA Owner’s Manual, and schedule a call if you have any questions about MYGAs. No sales pitch, just answers!
What are the next steps? Let me ship you a MYGA Owner’s Manual. If you don’t have MYGA Owner’s Manual, let me send it to you no strings attached. My gift. No one’s going to show up at your door or call you. Just email your physical address to me, or go to the site and sign up for it. Then go to the website and go to the Fixed Rate/MYGA button and play around with it. Look at your state. Look at what’s out there and filter it by your state of residence and term. You can always schedule a call with me. I won’t bite. I’m not angry and mean like I look in the picture. That’s just when I have to pay the tuition bills for the two out-of-state private schools. That’s how I look, but other than that, I’m typically a nice guy. Schedule a call. We’ll talk about it. There’s no sales pitches. Give yourself some credit. Schedule the call. Have a professional conversation. We’ll see if these things work for you. No pressure. No pitches. It’s a grown-up conversation. You make your decision on your own terms.
If you decide you want a MYGA, we handle all the paperwork.
It’s FedEx, online, etc. Everything is fully secured and encrypted. I have the best staff in the country. If you’re a client, you’re nodding your head. If you’re not a client, you will nod your head when you become a client. They take care of everything from start to finish even if it’s a transfer. It’s a fun application process. We never share information. Complete confidentiality
You can contact Stan The Annuity Man at any time!
So you know you can contact me at any time at 800-509-6473, email to Stan@stantheannuityman.com, or go to my website www.stantheannuityman.com. Text me on my cell. I mean I’m available. Don’t be shy. Don’t be scared. I really appreciate all of you being here. We’re doing these webinars, STAMinars, as quickly as I can put them together and as things hit me I deem important. I think it’s important that we tell people about this new MYGA feed that’s on the site.