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MYGA Ladder Cash Out Strategy

Stan Haithcock
March 31, 2024
MYGA Ladder Cash Out Strategy

Hi there. Stan The Annuity Man, America's annuity agent licensed in all 50 states. I am so glad you joined me today because this topic originated from a client, and when he first explained it to me, I was like, I did a Scooby-Doo. I'm like, "Roo, roo." But the more I listened, I said, "Well, okay, that makes sense." And ever since then, more than a handful of people have utilized the strategy after I told them about it. And there's been a couple that's proactively talked to me about it as well. It's called the MYGA Ladder Cash Out Strategy. We're going to talk about that after this.

The Ladder

Okay, so let's break down the MYGA ladder cash out strategy. So, MYGA is the annuity industry version of a CD, Multi-Year Guarantee Annuity. If you visit The Annuity Man, we have a live feed. You can pull your state and duration and see the guarantees for that specific duration. Please do not make it any more complex than a CD. It's the annuity industry's version of a CD. That's a MYGA. MYGA ladder means that you're buying different durations. Give you an example. Let's say you had $300,000. You said I want a MYGA ladder. We might do a three-year MYGA. A hundred thousand and a three- year MYGA, a hundred thousand in a five-year MYGA, and a hundred thousand in a seven- year MYGA. That's the laddering. You're having money coming due at different durations.

The Cash Out

The cash-out part of it is very interesting. You got MYGA, you got ladder. We all understand MYGAs; we all understand ladders. What's the cash-out? The cash-out is this: Many of you out there have specific needs at specific periods of time that you need lump sums. Everyone's situation is different. Annuities either fit or don't fit but are contractually guaranteed. If you need the contractual guarantees, then we can do these types of unicorn strategies to see if they fit for you.

Client Example

But this is what this gentleman wanted to do. He had specific things in his life for which he needed lump sums: a three-year, a five-year, a seven-year, and a 10-year duration. So, we bought those four durations, three, five, seven, and 10, and we split the money evenly. What he did at the end was instead of either taking the money and moving it back to wherever it came from, IRA, non-IRA, Roth IRA, or rolling it to another MYGA, you can do that in IRA, non-IRA, Roth IRA, non-taxable event, and all of them.

What he said, which was interesting, he said, "No, no, no, Stan The Annuity Man," and he talked like that. No, he didn't, but he should have. "I want to cash it out. Send me the cash, and have the annuity company send me the proceeds." So, at the end of year three, he didn't touch the interest. You can get some that you can take the interest out or 10% annually, but he said, "I want the money to compound. I want the interest to compound, but in the end, I want to cash it out, checks into me. I've got a specific place that needs to go." And then at the five-year time, same thing. Grows for five years, cash it out, and send me the money. Grow for seven years, tax-deferred, compounding, cash it out. And the same thing for the 10. MYGA cash-out laddering strategy. Pretty interesting.

And you might have a situation where that makes sense. Now let me give you some background to that. Now, at the time of this blog, check the date. MYGA rates are very competitive. They're at 20 year plus highs. Compared to CDs, and we love CDs, we just don't sell them; if your duration is less than three years, you need to lock in and buy them. Buy them at the banks or large firms, online, etc. But if the duration that you want to lock in the guarantee is more than three years, three years, five years, seven years, 10, then Multi- Year Guarantee Annuities, MYGAs, are typically going to provide the highest contractual guaranteed yield, actual yield, for those durations. If you have a specific goal that's three years and out, like this gentleman and many other people who have used the MYGA cash- out strategy since then, this might work for you. Let's look at a couple of scenarios.

A Few Scenarios

If you use IRA money, you're not getting double tax deferral; it's tax-deferred anyway. But in many cases, people use the MYGA cash out strategy for non-qualified, non- IRA money. Why is that important? That's an excellent question. I'm glad you asked that. With CDs in a non-IRA account, you have to pay taxes on the interest earned every single year. With

MYGAs, Multi-Year Guarantee Annuities, the interest grows tax deferred. It does not make them better than CDs. Let's be very clear. But in a non-qualified account, you're pushing the tax puck down the ice, for all you hockey people out there, or kicking the tax can down the road, all you North Carolinians out there or Carolinians where I'm from. You're deferring the taxes; it's growing and compounding tax defer. So, when you get to the end of the duration and need to cash it out, you can.

And then, you're paying taxes. If it's nonqual, you're paying taxes on the interest that you earn. Here's the other good part about the MYGA cash out strategy. Let's just say you go into a four-pronged ladder: three, five, seven, 10 years. It doesn't have to be that, so don't hang on to that, but I will give you an example. Three, five, seven, and 10-year MYGA ladder, and you're going to cash it in at each of those durations. When you get to the end of the duration, my team will be in touch with you 60 days before the money is due and say, what do you want to do? The great part about this is you're not locked into cashing it out. You might get to that three year duration and say, let's cash this one out. Send me the money as planned.

Then we might reach the five-year mark, two years later, we call you up and say, hey, what do you want to do? Do you still want to cash it out? You might have come to a fork in the road moment, saying, "No, I really don't want to cash it in. Let's roll it to another higher- yielding MYGA," if we can find that non-taxable event transfer and just keep going and building the ladder. In other words, you're not locked into the strategy of cashing it out, but you can go into it knowing exactly what you will have at the end of the duration.

So, you learned something new today, which is my job, Stan The Annuity Man, the edutainment czar of the annuity industry. Education plus entertainment, edutainment, to put things in your head on how these products can contractually work for your specific situation because there's no one size fits all.

And when you book a call with us, you will most likely get someone else. You might get me, doubt it, but you might. If you do, you've either won or lost the lottery; we'll find that out. But what we're going to do is listen to you. We're going to use our ears and mouth in proportion, two to one, we're going to try to figure out the best solution for you. I encourage you to visit The Annuity Man and run quotes using our calculators, read, watch, and everything else. It is for you, the consumer. It is not for agents and advisors. The book a call is for you, the consumer. It is not for agents and advisors. We are direct to you, the consumer. We work with pretty much every carrier out there to get the highest contractual guarantee quotes because these are commodities, and you own annuities for what they will do, not what they might do. And the will do is the contractual guarantee.

So, that's the MYGA cash out laddering strategy. It's pretty unique and pretty cool. Kudos to the people out there that actually told Stan The Annuity Man about that. I'm always thinking, and there's a lot of smart people out there. And once they understand where I'm headed, which is contractual guarantees only, I'm open to ideas. Now, typically, I've thought of most of them, but in this case, kudos to my clients. They came up with something that I thought was unique. I thought through it. It does make sense, and it might make sense to you. My name is Stan The Annuity Man. Thanks for joining us, and I'll see you on the next Stan The Annuity Man blog.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.

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