Attention all CPAs looking to bolster their long-term financial strategy: Sweeping changes have been made to MYGA (Multi-Year Guaranteed Annuity) products that CPAs will want to pay attention to. As we dive into the final quarter of 2023, several companies have raised their rates on MYGA annuities, making them an increasingly attractive option for those looking to bolster their financial plan.
Whether you’re contemplating retirement, growing your capital, seeking a guaranteed income for your final years, or simply looking for a safer, more reliable investment, now is an opportune moment to explore what MYGAs have to offer in this new rate environment.
MYGAs vs Traditional Annuities: What's the Difference?
Before we delve into why MYGA rate increases are worth your attention, let’s distinguish them from traditional annuities. While traditional annuities often have fluctuating returns based on market performance or the discretion of the issuer, MYGAs offer a guaranteed interest rate for a specified period – often several years, like a CD, though usually with higher rates.
Unlike variable annuities, where your capital is exposed to market risk, or immediate annuities, which begin payments almost immediately but offer little control over your funds, MYGAs give you a degree of control and a guaranteed return that make them an excellent middle ground amidst annuity products.
Why This is a Big Deal
For CPAs who understand the long-term ramifications of interest rates, these changes are not just a footnote—they’re a headline. In a financial environment where interest rates on savings accounts and CDs are often dismally low, guaranteed rates of up to 6.45% on a 5-year term is a substantial opportunity.
Key Features of Multi-Year Guaranteed Annuities (MYGAs)
MYGAs offer a set of features that are particularly beneficial for those concerned with financial planning and stability. Here are some of the most commonly found features in MYGAs that should pique the interest of financial professionals like yourselves.
Guaranteed Initial Rates
First and foremost, one of the most attractive features of MYGAs is the guaranteed initial interest rate, typically ranging from 3 to 10 years. What makes them even more enticing is the fact that these rates are often higher than traditional annuity rates. What we end up with is a guaranteed initial rate and a higher-than-traditional rate wrapped up into one financial product.
Annual Resets with Minimum Guarantees
Once the initial rate guarantee period expires, MYGAs may adjust the interest rates on an annual basis. Importantly, these rates generally won’t go below a predetermined minimum, offering you a consistent and predictable return on investment even after you’ve made a significant return on your initial guaranteed rate.
Daily Compounding
Another powerful feature is the daily compounding of interest, which can significantly affect the annuity’s growth trajectory. While this feature may not be universally true for all MYGAs, select issuers do offer daily compounding, making it a strong selling point for those looking to maximize their returns.
Flexibility with Liquidity
Liquidity is often a concern for long-term investments, and MYGAs are no exception. However, many of them come with transparent and easy-to-understand surrender charge schedules, allowing you to plan your liquidity needs more accurately.
Importantly, some MYGAs offer penalty-free withdrawal windows, usually after the initial guarantee period. This feature allows you to withdraw a predetermined portion of your investment without surrender charges, giving you an extra layer of financial flexibility when you need it most.
However, it’s crucial to note that if you are below the age of 59.5, you may still incur a tax penalty for early withdrawal, separate from any penalties the annuity issuer might charge.
Simplified Investment
MYGAs may allow for a single, upfront premium, making it easy for you to invest without worrying about ongoing contributions.
Final Thoughts
The new MYGA rates make them a standout option for those aiming to bolster their financial stability. With features like daily compounding interest and a guaranteed initial interest rate, they offer a balanced blend of safety and growth. With the ability to streamline them into your finances via technology advancements, it’s easier than ever to get started.
For CPAs navigating the complex waters of long-term financial planning, a MYGA annuity should be on your radar. Feel free to reach out for more personalized guidance; we’re here to help. Just click the button below.
