Multi-year guaranteed annuities help protect savings when markets are volatile, while delivering compelling returns and tax advantages.
For many people, comfort food – a buttery grilled cheese sandwich, a spoon of Häagen-Dazs straight from the carton, a bowl of chicken noodle soup, or whatever your favorite may be – brings a sense of satisfaction and contentment. It’s an antidote to trying times.
Commission-free multi-year guaranteed annuities (MYGAs) – the insurance industry’s alternative to bank certificates of deposit (CDs) – are a lot like comfort food. They’re simple and conservative products that provide peace of mind by:
Delivering steady guaranteed returns. MYGAs often offer rates that are higher than those of CDs, money market funds, and short- to intermediate-term government bonds. Rates are guaranteed for a specific period of time, usually 3 to 10 years, and the rate is locked in for the entire period.
Protecting your savings in volatile markets. The chance of losing assets in a market downturn makes many people uncomfortable, especially those who are near retirement. If the stock market loses value at the wrong time, an income plan can get derailed, and retirement could be significantly delayed. With a MYGA, your savings are protected from loss, and growth is guaranteed, by the financial strength and claims-paying ability of the insurance company that issues it.
Providing tax-advantages. Like other types of annuities, MYGAs offer tax-deferred growth. Any money that might have been paid in taxes remains in the contract, earning an attractive return. As the chart shows, tax-deferral means the contract accumulates value more quickly than it might otherwise.
It’s important to understand that MYGAs are not liquid assets, but many contracts allow penalty-free withdrawals up to a certain percentage of the account each year. In addition, some contracts allow all assets to be withdrawn in specific circumstances, such as a move to a nursing home. If you withdraw more than the penalty-free amount, there may be a surrender charge and potentially a tax penalty due to the IRS on interest earned if you make withdrawals before age 59½.
When the contract period ends, you have access to the full value of the contract, and you can:
- Withdraw the accumulated value,
- Renew the MYGA contract at the prevailing rate,
- Move the assets to another annuity.
If you would like to learn more about MYGAs, ask your advisor to explore DPL’s commission-free MYGA Marketplace. The marketplace includes dozens of current MYGA products with a range of rates and durations from leading carriers. If you don’t have an advisor, reach out to a DPL Consultant at 1-877-625-5544. We can help.