Setting up annuities is a popular investment strategy and something that should be considered when developing a financial plan. Annuities, which are backed by a dollar to dollar guarantee, are generally issued by an insurance company and can be invested and payed out in just about any way imaginable. Investing in annuities is a great way to save money tax deferred/tax free and have the ability to provide you with guaranteed income for life.

The dollar to dollar guarantee make annuities great for someone who is looking for monthly income. Annuities may be purchased for both short term and long-term horizons so they can work with a number of different investment strategies.

MYGA Annuities

A MYGA, is a Multi-Year Guarantee Annuity where the interest rate is guaranteed for the same duration as the surrender term period. It may also be referred to as a CD-Type annuity or MYG annuity. These types of annuities generally lack flexibility in favor of a predictable guaranteed rate of return for a specified duration. Another benefit, is the policy may be written under the Uniform Gift to Minors Act (UGMA). In most cases, if the policy is written under an UGMA, the policy owner and annuitant will avoid paying taxes on the accrued deferred interest!

Having an annuity with a fixed rate allows you to have an investment that isn’t linked to the performance of your portfolio. MYGA annuities are a great way to save for college and a popular option for long-term savings plans.

Benefits vs a CD

  • Tax Deferred Growth (You pay taxes on a CD every year.)
  • Generally pays a higher guaranteed interest rate.
  • Most MYGAs allow for a % withdrawal every year from the account with no penalty.

Downsides vs a CD

  • Surrender % rates are higher.
  • 10-20 minutes more paperwork.
  • Interest Rates are generally not publicly available.
  • There will be 2 yields: Initial and Surrender. This makes it harder to figure the interest you will receive over the life of the annuity. (We can help mitigate this.)

Full Service Financial Planning

LTR Financial Services is a Full Service CFP® Firm that offers a broad scope of financial services. Our experience allows us to help in multiple areas of your financial plan so you can get the most complete advice available. We offer help with investment planning, estate planning, retirement planning, tax advisors, irs tax representation, general insurance, mutual funds, accountants so you can get a complete picture of your financial health.

Schedule a consultation with LTR Financial Services to see what separates us from other financial services in the area today.