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What Happens at the End of a MYGA Term?

Stan Haithcock
March 18, 2024
What Happens at the End of a MYGA Term?

Hi, my name is Stan The Annuity Man, America's annuity agent licensed in all 50 states. That's yours as well. Yes, I do sell annuities when they're appropriate and suitable, and I do encourage you to go to my site and get all of my books. You can download them for free and schedule a call with me or one of my team members. So, what are we talking about today? We're talking about Multi-Year Guarantee Annuities, the annuity industry's version of a CD. I love people when they go, "I hate all annuities, Stan." I then ask, "Do you like CDs?" They go, "I Love, love CDs." Great. Then you'll love annuities because they're Multi-Year Guaranteed Annuities. MYGAs are Fixed-Rate Annuities. They pretty much work the same except for a couple of things that are pro MYGA, and MYGA is Multi-Year Guarantee Annuities, but we're going to get to all of that. We will also cover what happens if you buy a Multi-Year Guarantee Annuity and you get to the end of the term. Let's say you buy a five-year, Multi-Year Guarantee Annuity. What happens in year five? What happens? What are the choices that you have? We're going to cover that and more now.

‌State Level Regulation

‌Okay, so let's talk about, in general, Multi-Year Guarantee Annuities. If you visit The Annuity Man, we have a live feed of the best rates for your specific state of residence. I say that because MYGAs are issued by life insurance companies, and they're regulated and approved at the state level. So, if you live in Nebraska, the rates will be different. The offerings will be different than if you live in Florida. On our site, if you go there, you'll put in the state of residence, and then you'll put the duration that you're interested in, say, five years or three years, and then up will pop all of the top rates, and we'll have a yield to maturity column that you can say, "Okay, it's going to get me 5.4 or 4.8." Or whatever.

‌Multi-Year Guarantee Annuities are interest rate-sensitive. The rates are not primarily based on current rates today. It is an overall picture of the annuity and life insurance company holdings, and they have to make sure that they make a little bit of money with the investment-grade stuff that they buy and also give you a yield. But you'll find that Multi-Year Guarantee Annuities are very competitive when you're at the three-year duration and out. Before three years, like six months up to that time period, CDs, certificates of deposit really provide the highest yield. Now, I don't sell CDs. I'm not Stan The CD man. I'm Stan The Annuity Man, but CDs are great.

‌The 30,000-foot View

‌Let's take a 30,000-foot view. You bought the Multi-Year Guarantee Annuity from Stan The Annuity Man. That's fantastic. You're a client. We talked about it. It fit. You filled out the paperwork, put the money in there, and said, "Okay, I want to hold it for five years." Hey, that's great. So, what's going to happen during those five years? No annual fees, no moving parts. The agent got paid a commission at the time of application. A one-time commission is built into the policy. You never see it, but typically, it's between 0.5% and 1% up to 2%, depending on the carrier and their duration. So, you'll see that specific, let's say, you bought a five-year for 3%. You're going to see 3% annual interest for all five years. What happens at the end of those five years?

‌Your Options

‌First of all, if you use The Annuity Man, which I hope you do, we are on top of it. We are a big-time technology company. We are going to start contacting you about 60 days before that time period ends, and we're going to say, "Okay, we're coming close to the maturity date. You've got three choices." What are those three choices? You can say, "You know what, Stan, send me the money back with interest." Or "Transfer it to this other IRA." If it's in an IRA. And yes, you can buy Multi-Year Guarantee Annuities in IRAs and non-IRAs.

‌The second thing you can do is say, "I don't need the money. Let's transfer it to another Multi-Year Guarantee Annuity." Let's see the best rates out there and shop all carriers. Then we can do a transfer. If it's IRA to IRA, it's a non-taxable event transfer. If it's a non-IRA asset, it's what's called a 1035 transfer. 1035 refers to the IRS Code Section 1035. If you have no life and want to look it up, that's it. So, go look it up. But it says that you can transfer from one annuity to another, and it's a non-taxable event. You can do that.

‌Or the third thing that you can do is you could say, "You know what, Stan The Annuity Man, I've been getting interest." Or "I've just been letting it grow. But we need income now." Let's shop for the highest contractual guarantee, Immediate Annuity, or a Deferred Income Annuity if you need it for lifetime income. So, you can again transfer from one annuity to another, but you can transfer from one annuity type to another annuity type.

‌Let's go back over those three things again. At the end of the time period of the duration of the MYGA that you purchased from us, we're going to be in touch with you about 60 days before it matures. So, we're going to ask you this question. Do you want the cash? Do you want us to send you a check with all the interest? Do you want to transfer it to another annuity? You can do that, another MYGA, or do you want to convert it and transfer it to another lifetime income stream type annuity? Those are your three choices. Bottom line, with all three choices, you have full control of the asset.

‌We Won't Let That Happen

‌Okay, so let's keep talking about what happens at the end of the term of your purchase of MYGA that you bought from us. Number one, with annuity companies, they're not all the same. Of course they're not. It's like herding cats. They're all different. That's the reason you need to use us: We understand the rules for each carrier and each specific contract. When you get to the end, some carriers will renew it, but they won't lock you into a surrender charge. You can renew it, which I'm not sure you want to do. We will shoot for the highest contractual guarantees, and if you're going to just stay in an annuity, we'll move it to another annuity.

If you don't contact some carriers, they will lock it back in. That will never happen with us, ever, because we're on top of it. We're going to be in touch with you. I guess the only way it will happen is you never return our call because we will say, "Hey, it's coming due. We're 60 days out. You're 30 days out. You're 45 days out. What do you want to do?" We won't allow that annuity company to relock you in because they would love to relock you into a lower rate. That's not going to happen on our watch when we are in communication about your specific annuity.

‌Knowing the Rules

‌The bottom line is you need to know the rules. Some companies need to know your plans 30 days before the policy matures. Some companies need to know by 30 days after the policy matures. Confusing, I know. Wouldn't it be a better life, and wouldn't everyone get along better if all the rules were the same? Yeah, but they're not. The annuity industry would be better if all commissions on all annuity types were the same, if there were full transparency from the standpoint of what agents make, etc. None of that exists, so let's stop dreaming. It is what it is. But understand that when you buy a Multi-Year Guarantee Annuity, the rules are going to be determined by the carrier that you choose and the product that you choose, and that's why you need to work with The Annuity Man so that we can help you go through those rules and make sure that you take advantage of what you want to happen.

Because, at the end of the day, with annuities, it's a customizable product. You have to tell us exactly what you want to achieve contractually. Remember the two questions? What do I want the money to contractually do, and when do I want those contractual guarantees to happen? With Multi-Year Guarantee Annuities and Fixed-Rate Annuities, you want to protect the principal, don't want to pay any fees and get a guaranteed annual interest rate. Sounds familiar? Yeah, it's like a CD. It's buying a CD. It's the annuity industry's version of a CD.

‌But the end-of-term rules are where we really come into play, and we really help you and work side by side with you to make sure that everything happens the way you want it to happen. If you want to transfer, we can work on that. We can transfer it to another higher-yielding MYGA. Hopefully, it's higher-yielding. Or if you say, "Hey, I want to cash it in." We'll ensure it's cashed in, you won't incur any surrender charges, and it's done at the right time. Or if you want the money to transfer, if it's in an IRA, back to your IRA. We can help you with all of that. So, at the end of the term, the key is to work with us to make sure that what you want to achieve gets achieved.

‌That's a lot about Multi-Year Guarantee Annuities. The buying part of it is really easy. We talk on the phone; you go to The Annuity Man, look at the rates for your specific state, and decide on it. We take care of all the paperwork for you. But where we really help you is at the end of that duration, at the time it will mature. We can help you get through those rules to ensure that everything happens just like you want. So, with that, 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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