Annuities Exposed: MYGA Buyer BEWARE

Annuities Exposed: MYGA [Buyer BEWARE?]

This video is part of a larger series we’re doing called Annuities Exposed – but for today, we’re focusing on MYGAS.

Links mentioned in the video:
AM Best: https://www.ambest.com/
Fitch ratings: https://www.fitchratings.com/
Moody’s: https://www.moodys.com/
Standard and Poors: https://www.spglobal.com/ratings/en/s...
Statutory limits: https://www.nolhga.com/factsandfigure...
Annuities Explained:    • What The Heck Is An Annuity [Annuity Expla...  

Annuities Exposed Series
🔴 Annuities Exposed: MYGA:    • Annuities Exposed: MYGA Buyer BEWARE  
🔴 Annuities Exposed: Variable Annuities:    • Annuities Exposed: Variable Annuities [Buy...  
🔴 Annuities Exposed: Indexed Annuity:    • Annuities Exposed: Indexed Annuity [Buyer ...  
🔴 Annuities Exposed: SPIAs:    • Annuities Exposed SPIAs [Buyer BEWARE?]  
🔴 Annuities Exposed: Fixed Annuities:    • Annuities Exposed: Fixed Annuities [Buyer ...  

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What are MYGAs? MYGAs stands for Multi-Year Guaranteed Annuities. MYGAs are a contract between you and an insurance company and are a type of fixed annuity that focuses on accumulation of savings vs creating an income stream.

How do MYGAs work? You usually pay a lump sum of money to an insurance company, and they give you a specified amount of interest for a certain number of years.

How are MYGAs used? MYGAs are more used for accumulating your assets, than creating income streams for life.

Pros or Advantages of MYGAs:
Tax deferred accumulation of savings
higher rates than most CDs
Guaranteed interest rate for specific period of time
Less risk than stock market
Unlimited contributions for non-IRA accounts
Penalty-Free withdrawals of interest
Penalty-Free withdrawals of up to 10%

Cons or Negatives of MYGAs:
Surrender Charges – are a penalty that come into play when you surrender an annuity contract before the end of the term.
MVAs – Market-value adjustments are a monetary adjustment that can be applied to an annuity contract if the annuitant makes withdrawals beyond allowed limits during the surrender period.
Not FDIC insured like a CD

MYGA Withdrawal Options: Once your MYGA reaches the end of the term (at maturity), you can have several options to withdrawal your money:
You may withdraw the principal and all interest earned.
You may be allowed to renew the contract at the then current rates.
You may roll over or exchange the MYGA for another without paying taxes on the gains.

MYGA Death Benefit options are usually defined in two main categories:
Lump Sum Death Benefit: When the insured passes away, their beneficiaries may receive the full account value in one lump sum.
Annuitized (or Income stream): Some insurers will allow you to create an income stream from the death benefit, and have it been dispersed over your lifetime.

Are there any MYGA risks?
Since MYGAs are backed by the issuing company, (the insurer) your main risk is with the claims paying ability of this company.

Are MYGAs Safe? Are MYGAs Guaranteed as its name states?
When you open a MYGA contract with an insurer, you will be guaranteed your principal first, and then your rate you were offered to sign up.

How are MYGA’s Taxed?
Qualified Funds: If you use Qualified funds, you will be taxed when you withdraw the funds. It will be considered income and will tax both the principal and interest earned.
Non-Qualified Funds: If you use non-Qualified funds, you will be taxed only on the interest earned.

MYGAs vs CDs: MYGAs are compared mostly to Bank CDs and are sometimes called the insurance industry's version of a bank CD.
Here’s where they are the same:
CDs and MYGAs guarantee a contractual annual % of return for a specific period of time that you choose.
Both of them offer many choices of how long you want to lock in the guaranteed annual % rate.

MYGAs vs Fixed annuity: MYGAs are a type of a fixed annuity. The main difference here is that MYGAs guarantee a rate of return for a specified number of years, and Fixed annuities may offer a teaser rate in the early years and lower the rates for the duration of the contract.

MYGA Laddering: A unique MYGA strategy is to “ladder” a basket of annuities. You do this to try to hedge against rising interest rates, and not lock up your funds over a long period for what may be reduced rates.

What are MYGA rates? You can research across the web for multiple sites that update MYGA rates, sometimes daily. Make sure you are also comparing the rates, as this will help build your wealth over the long haul.
Stay tuned for the next video in our Annuities exposed series…

#annuitiesexposed #MYGAs #mygavscd #mygaladder #mygarates #whatisamyga #mygaexplained