Annuity vs. CD Comparison

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Hi there. Stan The Annuity Man, America's annuity agent,

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licensed in all 50 states and Puerto Rico, founder of CGO, Contractual Guarantees Only.

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You own an annuity for what it will do, not what it might do.

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Let's talk about annuities versus CDs. Let's do that comparison.

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There is a product in the annuity world that is a CD version that protects the principal

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and gives you a guaranteed interest rate. You probably haven't heard of it

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because the built-in commissions are so, so low,

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but that's the reason you need to hear about it. And we'll talk about that after this.

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So, I'm assuming that most of you know what a CD is. You know, you go to the bank or you go

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to the brokerage firm. I guess they have CDs as well. You give them money. They give you

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a guaranteed interest rate for a specific term or period of time that you choose.

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You can use it in all account types: Roth IRA, Traditional IRA, Non-IRA,

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checking-account-type money. Everybody feels good about CDs. My grandfather and grandmother,

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that's all they bought. My Mom and Dad, because I don't do business with

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family, I don't want to go to a family reunion and talk business. I actually refer my family

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to a good friend of mine in the business. I don't want to talk business with my family.

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Anyway, my Mom and Dad, they just bought CDs, and I thought that was great. Cool.

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In fact, my Mom, who's 87 this year, getting, I think, ready to be 88, she's always, "You know,

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I heard you on the video talking about this MYGA. Do I need a MYGA?"

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Maybe, but not for me. I guarantee you that, Mom. Not going to happen.

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First of all, she's 88. There are not many companies that issue them,

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but there are some that issue MYGAs up to age 90.

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But everybody knows what a CD is. And I told my Mom, "Hey,

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CDs are great for you. You understand them. You feel comfortable with them.

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You know the guy at the bank you talk to, and you can go by and see him." That's fantastic.

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But there is a version of a CD in the annuity space called a Multi-Year Guarantee Annuity.

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Banks and brokerage firms issue CDs. Life insurance companies that issue annuities

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also issue MYGAs—Multi-Year Guarantee Annuities. That's exactly what they are.

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Terms are as short as one year and can typically go as far out as 10 or

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more years. Ten years is normally where the carriers are pretty competitive. So,

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one, two, three, four, five, six, seven, eight, nine, and ten years over here.

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Again, MYGAs can be used in all the account types that CDs can be used in:

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Roth IRA, Non-IRA, Traditional IRA.

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But here's where they differ.

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One difference is from a taxation standpoint. In a Non-IRA account, a checking-account-type

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account, MYGAs, the interest grows and compounds tax-deferred. CDs don't.

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That doesn't make them better, but they grow and compound tax-deferred.

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People say, "Stan, where do you have your money? Where do you put your money?"

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So, first of all, the stock market, I don't need the stock market. The Annuity Man company is

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the best growth stock on the planet, okay? So I don't need anything more than that.

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So, the safe money goes into MYGAs because I don't need the interest. I don't need the money. And

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I don't need to pay taxes on that interest. So, it grows and compounds, and grows and compounds.

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So, when I get to the end of the duration, let's just say I have a five-year duration, I

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just roll it to another one and keep kicking the tax can down the... no,

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that's wrong. The tax can down the road. Puck down the ice. Yeah, there you go.

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Anyway, the point is: defer, defer, defer, defer.

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They say, "Well, that's going to be a tax bomb for your children, your two daughters."

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Okay, they'll get over it. Okay, they'll be okay.

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But the point is, you can really play the tax game over here in a Non-IRA, Non-qualified,

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checking-account-type account because that interest grows and compounds tax-deferred.

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Any money you bring out is taxed at ordinary income levels, but you can have a strategy.

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I have a lot of people who just lock and load like me. Roll it, roll it, roll it,

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roll it. Rolling, rolling, rolling. I mean, you can just keep doing that.

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So again, CDs: Roth IRA, IRA, Non-IRA.

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MYGAs: Roth IRA, Non-IRA, Traditional IRA.

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Same. You can use them in the same accounts.

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Both have guaranteed interest rates for a term that you choose.

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Both have no annual fees.

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Both have no moving parts.

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Both have no market attachments.

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Hopefully... sometimes you see some funky CDs on the brokerage side,

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but traditional CDs don't have any market attachments. MYGAs never do.

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Both are very easy to understand.

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Both are transparent.

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Both commissions are built in.

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Both commissions are low.

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Both are great.

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So, in a principal-protection world, the combination of CDs and MYGAs works.

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Now, what I've seen in my decades out here as the top agent in the country: typically,

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CD rates on the one- and two-year level are very competitive with MYGAs and sometimes beat them.

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But once you get to the three-year duration and out, okay, once you're three years and beyond

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on the duration curve, MYGAs historically have a better contractual yield than CDs.

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Does that make them better? No.

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But in combination, you can use them both together. You can ladder them. You can buy, like,

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a three-year, five-year, seven-year, and ten-year and have money coming due at different durations.

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You can choose MYGAs that allow you to take interest out or not.

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There are MYGAs out there that allow you to take 10% out or not.

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Both are RMD-friendly.

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So, if MYGAs aren't on your radar screen, go to my site at theannuityman.com. There's a

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live feed. Just put in your state, put in the duration, and you'll see them pop up.

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We show everything. That doesn't mean we recommend everything, but we do show everything.

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As a top agent in the country, I feel it's my responsibility to show the world what's

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out there. Then, my recommendations will come to the forefront if you get serious

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about wanting to purchase one and use us to get you across the finish line.

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And I would encourage you to go to the site and download the books.

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We don't have a CD owner's manual, but we have a MYGA owner's manual that you can take a look at,

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in addition to the live feed and hundreds of videos I've done on the subject.

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But CDs and MYGAs work together.

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You know, the reason that MYGA rates typically are a little bit higher than CD rates is that life

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insurance companies issue Multi-Year Guarantee Annuities, and they have many levers of profit.

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They sell life insurance.

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They sell lifetime income products.

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They have a legacy bond portfolio.

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There's something called mortality credits that they're playing off of as well.

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And then they look at typical interest rates, whereas CDs are interest-rate focused.

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Interest rates play a minor role in MYGA pricing.

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So, you need to look at that. You need to consider that for

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your safe money in chapter 2 of your life.

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You know, annuities solve four things: principal protection,

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income for life, legacy, and long-term care.

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If that "P" of principal protection is a mainstay for you, MYGAs should be in the conversation.

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There's really five places to put your money

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in the world that are safe and give you a guaranteed interest rate:

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CDs

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Money markets Treasuries

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AAA municipal bonds MYGAs

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Those are your five.

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Okay, we talked about two of them today that are eerily similar.

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But the cool part about this is if you've got some non-qualified, checking-account-type money

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that you want to get a good interest rate on, but not pay income tax on it,

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and just let it defer and grow and compound, MYGAs, that's what I do,

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and I love it, and my wife loves it. It's a good legacy strategy as well for the family.

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Okay, one last thing.

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Go to my site, theannuityman.com.

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Email me at [email protected].

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And one last thing, above my head, spinning clock.

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Great video. One that you've always been waiting on: Why People Still Hate Annuities.

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Why? I mean, they still do. They probably always

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will unless the industry cleans it up and makes me czar forever.

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And I would clean it up quickly because the interesting part about it is

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everybody in this country already owns an annuity. It's called Social Security,

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and they love it. It's lifetime income. It's guaranteed. They love it.

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But somehow they hate annuities.

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Boy, that's some bad marketing right there for the industry.

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Really wish they would put me in charge of that.

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Maybe they will in the future.

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Until then, I'm going to do a video every single day until I change them.

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My name is Stan The Annuity Man.

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Thanks for joining me.

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See you next time.