Your Principal Protection Trifecta: Shootin' It Straight with Stan®
Today's topic is your principal protection trifecta. I'm talking about right now in volatile times, and there's always going to be volatile times, but there are pending wars right now, there's inflation, there's market volatility, there are elections coming up, there's always elections coming up, and people that are retiring are tired of it. They're tired of the volatility. They're tired of ups and downs.
I got a call today from a guy and he said, "I'm just worn out. I've lost $300,000 in the markets in the last 100 days or so, and I'm just worn out. I'm looking for safety." Now, for the market mavens out there, they're going to say, "Well, if you just kept your money in the markets for the 13 days or the seven days," whatever the number is, "You would still make it." Listen, I get all that. Did the market stuff. But Stan the annuity man® is all about contractual guarantees. It's all about what an annuity will do, not what it might do®, or in this case, the trifecta of principle protection. What those products will do, not what they might do.
The Three Products
Now two of the three products we're going to talk about today, I don't sell. I will never sell. And you say, "Wait a minute. I thought you'd be trifectaing three annuities." No. What are the three products? CDs, Certificates of Deposit. I do not sell those. I will never sell those. Those are bank-issued or brokerage-issued. CDs. You give them the money, they protect the principle, you don't pay fees, and you can take out the interest if you want to. At the end of the term, you can do whatever you want with your money. That's one product. The second product is Multi-Year Guarantee Annuities, the annuity industry version of a CD. You give the annuity company money. They protect your principal. They don't charge you any annual fees. No gotcha fees. You get a guaranteed annual interest rate every single year. You have the ability to pull out the interest with most of these carriers. And at the end of the term, guess what? You can take all your money back just like a CD.
And the third part of the trifecta is treasuries. I don't sell treasuries. You can go to www.treasurydirect.gov and buy them yourself. I just did a recent video called “I bond no brainer.” The only problem with I bonds, which are treasuries, is the fact that you can't put a ton of money in. The limitation is very low. Heck, if you could whack it with $200,000, I'd say hit it and go all in. But that's your principal protection trifecta. That's safe money. That's when your principle never fluctuates. You never are charged a fee. You get a guaranteed interest rate. The difference between MYGA's compared to CDs, in a non-IRA setting, the interest can grow and compound tax deferred. Doesn't make it better than CDs, but that's the difference. Now, MYGAs CDs, all that can be put in Roths, IRAs, non-IRAs, etc.
Are They Safe?
Treasuries are their own animal. Buy them direct. People say, "Well, are they safe?" I think personally treasuries are the safest of the three because the government can tax and/or confiscate our money to pay it. And guess what? They will. If you rank the three, treasuries are number one. Safest on the planet.
The second one that's safest is CDs. Why? FDIC. F means federal. Same thing as a treasury. They can tax or confiscate. And then brokerage type CDs, brokerage issued CDs, are under SIPC, Securities Investment Protection Corporation. MYGAs are safe but there as safe as the claims-paying ability of the issuing carrier. Yes, there are state-guaranteed funds. You can go look at that at www.nolhga.com. But your primary decision should be based on the claims-paying ability of the Multi-Year Guarantee Annuity company. As I tell people all the time, when you buy MYGAs we're not marrying them. We're dating them. What does that mean? If we're buying a three-year MYGA or a five-year MYGA or a seven-year MYGA, my recommendation is based on the claims-paying ability for that duration. It's not a lifetime income stream.
Typically, A plus or better if it's a lifetime income stream as long as you're breathing, even if you're on a ventilator. But when we're talking about principal protection, short-term paper, like two-year, three-year, four-year, five-year, seven-year, even a 10-year MYGA, we're going to be looking and recommending based upon the claims-paying ability for that term. Why? Because in most cases, at the end of that term, we're either going to be sending the money back to you or transferring it to another MYGA. In most cases, it's not the MYGA you came from because these are commodity products.
No this isn't Jimmy Carter interest rates where rates were 12 and 15 and 18 or whatever where your grandad used to say, "Well back in the day I used to get 15% on my CDs." Yeah. That's not going to happen. But right now, interest rates are fair and they're chunky compared to what they used to be, and the bell doesn't ring at the top. So, what I would tell you is if say 5%, most durations with MYGAs, you can get 5% and most durations with treasuries or CDs, they're getting good rates. So, the question I have for you is, if you could average 4% on all three, why do I put all three in there? Because number one, yes, I am Stan the annuity man, yes, I am America's annuity agent®, and yes I do sell annuities more than anyone in the world, but you can't have all your money in annuities.
You can't put all your money there, so you have to spread it around. But if you could get that 4% or four and a half percent in combination, you're getting five-plus with the MYGAs, can you live off that and not touch the principle? Do you really need to be in the markets? If you combine that with what your current income floor is, which is social security, a pension if you're so fortunate if you have a legacy portfolio or dividend stocks that you're never going to sell, but they're kicking off a dividend, what's that income stream coming in? Rental houses, side hustles. If you're selling the popcorn at the fair, whatever you're making money on the side, right? But the point is, can you live off the principle?
Take all of your investible assets. Investible assets. Take the total, then multiply it by four, four, and a half, or 5%. Can you live off that? Because if you can, then why are you doing all this other nonsense? Play the trifecta. People say, "Well trifectas like gambling, right? I go to the dog tracks and I got a trifecta going." Or I bet the football games are a trifecta. This trifecta, you're going to win every single time. This trifecta is a contractual guarantee. CDs, contractual guarantees. Treasuries, contractual guarantees. Multi-Year Guarantee Annuities, contractual guarantees. Will do, not might do. You're owning these because of what they will do, not what they might do. They will do the yield. You're buying the yield. The yield is contractual. Can you live off those contractual guarantees? Can you miss out on the next Tesla or Apple or Bitcoin or whatever? Do you have the capacity to do that? Do you have the maturity to go to the cocktail point and go, "Yeah. I'm in the trifecta. I'm investing in the trifecta. I'm doing trifecta financial planning." "What's that?" "Treasuries, CDs, and MYGAs. I'm just peeling off the interest and living off that and the principals never touched."
Talk about legacy. That's legacy. Talk about safety. That's safety. Talk about something you can sell to your spouse who doesn't give a crap about the markets and every time it goes down, they're elbowing you in the rib and going, "Why are we there? Why are we doing this? Why are we losing? Why are we with that advisor?" How about having that conversation with them and go, "You know what? We're going to take our X amount of money and just live off the interest and never touch the principle." My spouse loves that strategy. That's all we do. I drink the Kool-Aid because I've come to the conclusion that making more money in the markets isn't going to change my life. Is it going to change yours? Think about it.
So, I want you to think about the trifecta of safety, the trifecta of principle protection, the trifecta of guaranteed interest, the trifecta of no fees, the trifecta of will do not might do, the trifecta of principle protection and safety. Treasuries, CDs, and Multi-Year Guarantee Annuities. You might have just found the portfolio that you're looking for. Now we want to handle those MYGAs for you, but you can get CDs and you can get treasuries from just about anywhere. Treasurydirect.gov. Bankrate.com. I have no affiliation with either, except for the treasuries. But go to theannuityman.com and pull up our live feed of MYGA rates. The trifecta of principle protection. I hope that I'm making you think because let's think differently, let's solve things differently, and let's solve things contractually.
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.