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Green Pastures Wealth Management
Home
About Us
Investments
  • How We Invest
  • All Weather Models
  • Sequence Of Returns Risk
  • Buffered & Floor Models
  • Free Portfolio StressTest
Retirement Income
  • Your Retirement Number
  • How Much Can You Withdraw
  • Sequence Of Returns Risk
  • Cost Of Living
  • Longevity Risk
Annuities
  • Buffer & Floor Annuities
  • Multi-Year Guar Annuities
  • Fixed Index Annuities
  • Immediate Inc Annuities
  • Deferred Income Annuities
  • QLACs
  • Fixed Income Ladders
Disclosures
  • Disclosure
  • Privacy Policy
  • Code Of Ethics
  • Outside Links
  • Form ADV Part 2
Contact Us
More
  • Home
  • About Us
  • Investments
    • How We Invest
    • All Weather Models
    • Sequence Of Returns Risk
    • Buffered & Floor Models
    • Free Portfolio StressTest
  • Retirement Income
    • Your Retirement Number
    • How Much Can You Withdraw
    • Sequence Of Returns Risk
    • Cost Of Living
    • Longevity Risk
  • Annuities
    • Buffer & Floor Annuities
    • Multi-Year Guar Annuities
    • Fixed Index Annuities
    • Immediate Inc Annuities
    • Deferred Income Annuities
    • QLACs
    • Fixed Income Ladders
  • Disclosures
    • Disclosure
    • Privacy Policy
    • Code Of Ethics
    • Outside Links
    • Form ADV Part 2
  • Contact Us
  • Home
  • About Us
  • Investments
    • How We Invest
    • All Weather Models
    • Sequence Of Returns Risk
    • Buffered & Floor Models
    • Free Portfolio StressTest
  • Retirement Income
    • Your Retirement Number
    • How Much Can You Withdraw
    • Sequence Of Returns Risk
    • Cost Of Living
    • Longevity Risk
  • Annuities
    • Buffer & Floor Annuities
    • Multi-Year Guar Annuities
    • Fixed Index Annuities
    • Immediate Inc Annuities
    • Deferred Income Annuities
    • QLACs
    • Fixed Income Ladders
  • Disclosures
    • Disclosure
    • Privacy Policy
    • Code Of Ethics
    • Outside Links
    • Form ADV Part 2
  • Contact Us

Multi-Year Guarantee Annuities ("MYGA")

Delivering You Principal Protection, Fixed Income And Tax-Deferred Growth

  

Individual needs vary with respect to investment and retirement income goals, asset allocation and risk tolerance levels, investment time horizons, tax considerations, etc.


We implement Multi-Year Guarantee Annuities ("MYGA") for individuals looking to de-risk some of their portfolio and add principal protection and tax-deferred growth to their investment and retirement income plan.


MYGAs, also known as Fixed Rate Annuities or CD Type Annuities, are the simplest annuity of all.


MYGAs are essentially the insurance industry’s version of a tax-deferred Certificate Of Deposit (“CD”). MYGAs provide a predetermined and contractually guaranteed interest rate for a specified number of years.


However, unlike CDs, the interest grows and compounds tax- deferred until it is withdrawn.


Investors cannot count on traditional bond portfolios for safety or yield, so many people turn to MYGAs – not bonds – for their fixed income allocations, to complement their equity portfolio and help improve portfolio performance, especially during rising interest rate environments, when bonds may lose value.


Multi-Year Guarantee Annuity Rates


Below is a sample of MYGA rates as of the date shown. Prices, ratings, yields, rates and availability are subject to change at any time.

 

Download PDF
Download PDF

How MYGAs Work


Solve For Principal Protection

  

MYGAs are used for clients nearing or in retirement and guarantee your principal from any loss.


MYGAs help mitigate Sequence Of Returns Risk by lowering the risk of your investment and retirement income portfolio and help keep your long term plan on track.  


Solve For Fixed Income


MYGAs provide a guaranteed rate of return and may make sense if you are looking to de-risk some of your bond portfolio as part of your fixed income asset allocation.


Similar to CDs, MYGAs contractually guarantee a specific annual interest rate for a specified number of years (or an effective yield for the life of the annuity contract) that you choose at the time of application.


MYGAs have no annual fees and no moving parts. 

The majority of MYGAs range from as short as two years to as long as 10 years. MYGA interest rates are often higher than CD rates and provide a higher accumulation over the life of the annuity.  Generally, we have found that MYGAs provide higher rates than CDs when the contractual period is three years or more. 

Solve For Tax Deferred-Growth... Steadily Growing... Safe And Secure!


The primary functional difference between a MYGA and a CD is that with a MYGA held in a non-qualified account (for example, assets held in an individual or joint account) - you do not pay taxes on the interest until interest is withdrawn - so your interest can compound and grow tax-deferred. With CDs held in non-qualified accounts, you have to pay taxes on the interest annually. 


Also, unlike Traditional IRAs, 401(k)s and other retirement vehicles, MYGAs do not have mandatory Required Minimum Distributions ("RMD") so you can enjoy the benefits of compounded tax-deferred growth for as long as you wish.


When MYGAs mature, they can be renewed or exchanged to another MYGA or other type of annuity without tax consequences to defer income until later in retirement when you may be in a lower tax bracket and withdrawals may be taxed at a lower rate.


May Help Reduce Taxes On Social Security Income

Potentially up to 85% of your Social Security benefits may be subject to income tax depending upon:

(a) your Social Security benefits,

(b) the amount of income you are earning, and

(c) the sources of your income during retirement.


Interest on savings accounts, CDs, money market mutual funds, taxable bonds and municipal bonds is included in Provisional Income, the IRS threshold above which social security income is taxable.


However, MYGA interest can compound and grow tax-deferred and be excluded from the Provisional Income calculation until interest is withdrawn.


By moving some of your funds into a MYGA, you may be able to help reduce taxes on your Social Security income, by controlling the timing and amount of withdrawals from your MYGA, when you may be in a lower tax bracket and withdrawals may be taxed at a lower rate.


Solve For Flexibility


Most MYGA contracts allow you to withdraw up to a specified percentage of interest and/or principal each year during the life of the contract without being subject to an early surrender charge.


This penalty-free feature can be used in conjunction with Social Security, pensions, etc. as part of your retirement income plan. 


Solve For Annuity Rescue

 

If you own an existing fixed or variable annuity, you may want to explore the potential opportunity of exchanging your current annuity into a MYGA. 

Our free ANNUITY RESCUE SERVICE can provide you with an evaluation of your existing annuity contracts to determine if it is possible to achieve your goals more effectively.


Download PDF

Implementing MYGAs In Your Investment And Retirement Income Portfolio

  

Following is a brief illustration of how to add a multi-year guarantee annuity ("MYGA") to the fixed income allocation of your investment and retirement income portfolio to help reduce portfolio risk.


Download PDF


Additional Considerations

  

When MYGAs mature, you may choose to:

(1) Cash in and surrender your contract without penalty,

(2) Renew your contract at the renewal rate without tax consequences to continue deferring taxes until later in retirement when you may be in a lower tax bracket and your withdrawals may be taxed at a lower rate, or *

(3) Exchange your contract to another annuity without tax consequences to continue deferring taxes until later in retirement when you may be in a lower tax bracket and your withdrawals may be taxed at a lower rate. *


If you should die before liquidating a MYGA, your beneficiaries will get the remaining value of your MYGA as a death benefit – not the insurance company!  


MYGA Key Features And Benefits


Following is a summary of key features and benefits that MYGAs offer:

 

MYGAs Have No Annual Fees

Simple

Once a MYGA is funded, the only work on your part is to collect your interest. You can have the interest automatically added to your annuity contract to compound and grow tax-deferred... or have the interest sent directly to your bank account.


Principal Protection

MYGAs are not subject to penalties or market losses if held to maturity. Your principal is fully protected against stock or bond market downturns.


MYGAs are issued by life insurance companies and guarantees are backed by the financial strength and claims paying ability of the issuing insurance company. We work with only the highest rated insurance companies in the industry. MYGAs are regulated at the state level. *, **, ***

Non-Correlated To The Stock Market

Sequence Of Returns Risk Mitigation

MYGAs help protect your income from stock or bond market down turns which, as you near or are in retirement,  can help lower your stress level and give you Peace Of Mind.


MYGAs Can Become A Part of Your Fixed Income Allocation Within Your Investment And Retirement Income Portfolio

Typically Higher Interest Rates Than U.S. Treasury Securities And CDs

Similar to CDs, MYGAs provide a fixed rate of interest for a guaranteed term, typically as short as two years and up to 10 years. MYGA interest rates are generally higher than U.S. Treasury Securities and CD rates when the contractual period is three years or more.


Can Be Used To Create MYGA Income Ladders That Mature At Different Years In The Future

Similar to laddering CDs or bonds, MYGAs work well in conjunction with other MYGAs, FIAs, SPIAs, DIAs and QLACs to create annuity income ladders.


Penalty-Free And Systematic Withdrawal Options

Unlike CDs, most MYGA contracts allow you to withdraw up to a specified percentage of interest and/or principal each year during the life of the contract without being subject to an early surrender charge.

Can Be Purchased In IRA, Roth IRA And Non-IRA Accounts ****

Your Interest Can Compound And Grow Tax Deferred In Non-IRA Accounts

​Unlike CDs, the interest on MYGAs compounds and grows tax deferred in non-qualified accounts (for example, assets held in individual or joint accounts) until interest is withdrawn.


Also, unlike Traditional IRAs, 401(k)s and other retirement vehicles, MYGAs do not have mandatory Required Minimum Distributions ("RMD"). When MYGAs mature, they can be renewed or exchanged to another MYGA or other type of annuity without tax consequences to defer taxes until later in retirement when you may be in a lower tax bracket and your distributions may be taxed at a lower rate. ****


May Help Reduce Or Eliminate Taxes On Social Security Income

Potentially up to 85% of your Social Security benefits may be subject to income tax depending upon:

(1) your Social Security benefits,

(2) the amount of income you are earning, and

(3) the sources of your income during retirement.


Interest on savings accounts, CDs, money market mutual funds, taxable bonds and municipal bonds is included in Provisional Income, the IRS threshold above which social security income is taxable.


However, MYGA interest can compound and grow tax-deferred and be excluded from the Provisional Income calculation until interest is withdrawn.


By moving some of your funds into a MYGA, you may be able to help reduce taxes on your Social Security income, by controlling the timing and amount of withdrawals from your MYGA, when you may be in a lower tax bracket and withdrawals may be taxed at a lower rate.


Can Be Converted To A SPIA For Lifetime Income Guarantees

May Avoid Probate

Any remainder in your MYGA may potentially pass efficiently outside of probate and be paid discreetly and directly to your heirs (not the insurance company) within weeks after all required paperwork is received in good order. 


That allows your loved ones to bypass the long, painful and costly probate process - saving them time, court costs, administrative costs and legal fees - and leaves your heirs money instead of family court battles and legal fees.*****

If you die before liquidating a MYGA, your beneficiaries will receive the remaining value of your annuity as a death benefit - not the insurance company!

Create A Legacy That Lasts


Spousal Beneficiaries And Inherited MYGAs

The taxes your spouse may owe will be dependent upon the distribution option he or she chooses when he or she inherits your annuity. Any taxes owed on distributions are deferred until he or she receives them. 

                                                                                                                                                                   Qualified (IRA) Annuities

A Spousal Beneficiary may elect to: 

(a) receive a one-time lump sum payment,

(b) keep the MYGA in your name, continue to enjoy the benefit of compound tax-deferred growth, and take out RMDs using his or her life expectancy or a payout option that provides income for a specified period of time, 

(c) switch the MYGA into his or her name and continue enjoying the benefit of compound tax-deferred growth, and take RMDs using his or her life expectancy or a payout option that provides income for a specified period of time, or 

(d) exchange the inherited annuity to another annuity if it is more beneficial to his or her specific situation, continue enjoying the benefit of compound tax-deferred growth, and take out RMDs using his or her life expectancy or a payout option that provides income for a specified period of time. Options (b), (c) and (d) potentially may help your spouse significantly reduce taxes on inherited qualified MYGAs by deferring taxes until later years when he or she may be in a lower tax bracket. ******


Non-Qualified (non-IRA) Annuities

​A Spousal Beneficiary may elect to:

(1) receive a one-time lump sum payment, or 

(2) select from options (b), (c) or (d) above. Options (b), (c) and (d) are referred to as a "Non-Qualified Stretch" and potentially may help your spouse significantly reduce taxes on inherited non-qualified MYGAs by deferring taxes until later years when he or she may be in a lower tax bracket. ****** 

​​Non-Spousal Beneficiaries And Inherited MYGAs

The taxes a non-spousal beneficiary may owe will be dependent upon the distribution option he or she chooses when her or she inherits your annuity. Any taxes owed on distributions are deferred until he or she receives them. 

Qualified (IRA Annuities)

A non-spousal beneficiary may elect to: 

(a) receive a one-time lump sum payment, or 

(b) distribute 100% of inherited qualified MYGAs within 10 years which may help significantly reduce taxes by deferring taxes until later years when he or she may be in a lower tax bracket. *****

Non-Qualified (non-IRA) Annuities

A non-spousal beneficiary may elect to:

(a) receive a one-time lump sum payment,

(b) switch the MYGA into his or her name, continue to enjoy the benefit of compound tax-deferred growth, and take out RMDs using his or her life expectancy or a payout option that provides income for a specified period of time, or

(c) exchange the inherited annuity to another annuity if it is more beneficial to his or her specific situation, continue enjoying the benefit of compound tax-deferred growth, and take out RMDs using his or her life expectancy or a payout option that provides income for a specified period of time. Options (b) and (c) are referred to as a "Non-Qualified Stretch" and potentially may help your non-spousal beneficiary significantly reduce taxes on inherited non-qualified MYGAs by deferring taxes until later years when he or she may be in a lower tax bracket. ******

 

* Surrender charges, market value adjustments and other contract charges may apply that can reduce the principal if liquidated before maturity.
** Guarantees are backed by the financial strength and claims paying ability of the issuing insurance company.

*** The insurance company charges no liquidation penalty if held until maturity; however, similar to assets held in an IRA, MYGAs are typically designed for long-term tax-deferred investing. If you take withdrawals before you reach age 59 1/2, then you may have to pay a 10% early withdrawal federal tax penalty in addition to ordinary income taxes. You should request and review a Product Fact Sheet, for complete information and restrictions that may apply, prior to making any decision to purchase a MYGA product.
**** The purchase of an annuity within a retirement plan that already provides tax deferral under sections of the Internal Revenue Code results in no additional tax benefits. An annuity should be used to fund a qualified plan based upon the annuity’s features other than tax deferral. All annuity features, risks, limitations, and costs should be considered prior to recommending the purchase of an annuity within a tax-qualified retirement plan. In addition to surrender charges, withdrawals are subject to income tax.
***** Please consult with and rely on your own legal or tax advisor and refer to your contract.
****** Please consult with and rely on your own legal or tax advisor and refer to your contract for situations of joint owners and annuitants.​


Multi-Year Guarantee Annuities ("MYGA") Summary


Green Pastures is a big proponent of keeping things simple.


When you get to a certain point in life, there's a tendency to want to simplify your life - including your investment and retirement income portfolio - and MYGAs can help you accomplish this goal.


​We believe the best way to put MYGAs to use is in conjunction with your investment and retirement income portfolio. If you are nearing or in retirement, you may want to consider de-risking a portion of your portfolio into MYGAs, as part of your fixed income allocation within your investment and retirement income plan.

 
MYGAs Are A Great Transfer Of Risk Solution


While MYGAs aren't for everyone, they are a great transfer of risk solution that specifically solve for principal protection and guaranteed income that can compound and grow tax-deferred.


If you need to solve for one of these items, then you may want to consider adding a MYGA to your investment and retirement income portfolio. 

The best way to gain an understanding of how MYGAs work is to request a Personalized Annuity Illustration unique to your situation. We will help you make an informed decision and select among the best rates available among the highest rated insurance companies that fit your unique financial situation and investment and retirement income goals.


Please subscribe to our Free Monthly Fixed Income, Buffered & Floor Investment Rates E-Update  that includes timely MYGA rate changes and opportunities.


Green Pastures Monthly E-Update!

Sign up for our Free Monthly Fixed Income, Buffered & Floor Investment Rates E-Update to receive timely fixed income and buffered and floor investment rate changes and opportunities.

Green Pastures Wealth Management LLC

P.O. Box 110475 | Trumbull, CT 06611 | lee@greenpastureswm.com | 203.449.9889

Copyright © 2019 Green Pastures Wealth Management LLC. All Rights Reserved.

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