MYGA Fixed Rate Annuities
Current Rates As High As
2.35%
3 YR 
3.15%
5 YR 
3.20%
7 YR 
3.25%
10 YR

Laddering Investments: Annuity Ladder Principal Protection

Laddering Investments

We're going to talk about laddering investments and protecting your principal all at the same time. You need to understand the contract before you buy anything, right? The only urgency is to understand, not the urgency to buy.

Now, we're going to talk about laddering and principally talking about multi-year guarantee annuities and fixed index annuities. So, laddering strategies are nothing new. People have been laddering CDs forever. They've been laddering bonds for forever. Therefore, you can also ladder annuities. Now, you can ladder for income, but today we're talking about principal protection. If you’re curious, on our site there's a live MYGA feed, with fixed rate annuities. MYGAs are the annuity industry's version of a CD, a certificate of deposit with no annual fees, and no moving parts. It's very simplistic, and easy to understand.

You give the insurance company money and you choose the time, and the duration. Then you're going to get a specific interest rate for that specific period of time. Now, with laddering MYGAs, multi-year guarantee annuities, typically, I don't like you to go farther out than five or seven years. Obviously the longer the duration, typically the higher the guarantee. But the good news about that is you have money coming due, starting in year three, and then in year five and year seven. And hopefully we can transfer that non taxable event to a higher fixed rate. Or you can just get your money back and move on and do what you want.

The other ladder that we're doing a lot of is a three, four, and five-year ladder. So a three-year MYGA, a four-year MYGA and a five-year MYGA, keeping those durations short. I always tell people if you're deciding between this duration and that duration, choose the shorter one. Currently there's a situation where there's some A plus rated carriers that typically aren't in the MYGA world, that aren't competitive. But for some reason, they've come out and they're very competitive at the seven year level.

So a lot of people say, "Well, heck, they're A-plus rated. Let's go get that seven year piece of paper." That makes sense. There's specific times, but most of the time you should be more cautious and choose the shorter duration because you always want money coming due and accessible. You don't want to lock in for the longterm.

Okay. So what I was talking about was a fixed rate ladder we use in MYGAs. There’s another CD product out there that I know that agents probably don't tell you is a CD product. It was designed in 1995 to compete with CD returns. We are talking about an indexed annuity, or fixed index annuity. I know way too many stories of people who have gone to the bad chicken dinner seminar, or you might have an agent advisor that said, "You're going to get market upside with no downside." Well, if that was true, then the fed would just buy index annuities period, because that's a good deal market upside with no downside. It doesn't work that way.

Laddering fixed rate annuities or laddering fixed rate annuities and index annuities together, can provide that principal protection

Typically, the blended return is a CD type level. There's absolutely nothing wrong with that in a laddering strategy. If you would like a bit more yield than that, I can't guarantee it. But with index annuities, there's a potential that you might get a little bit better than CD returns. So what we do is we will create what's called a mixed fixed ladder. You're mixing the two fixed rate type annuities, two fixed annuities, MYGAs, multi-year guarantee annuities and fixed indexed annuities. If it's a mixed, fixed ladder, which is MYGAs and indexed annuities, you don't attach an income rider to an indexed annuity, and there's no annual fee. So 100% of the principle is protected and there are no annual fees. With 10,000 baby boomers retiring or hitting that retirement age every single day, a lot of people are looking for contractual guarantees. They're looking to not lose a penny.

Now, when I say that, I need you to be rational. I need you to know that while you may not get the greatest returns, your principal with be very well protected. If you’re at that principle preservation stage of life where you don't want to lose any more money, laddering fixed rate annuities or laddering fixed rate annuities and index annuities together, can provide that principal protection with the return scenario that I think you'll be really happy with.

We're going to talk about laddering investments and protecting your principal all at the same time. You need to understand the contract before you buy anything, right? The only urgency is to understand, not the urgency to buy.

Now, we're going to talk about laddering and principally talking about multi-year guarantee annuities and fixed index annuities. So, laddering strategies are nothing new. People have been laddering CDs forever. They've been laddering bonds for forever. Therefore, you can also ladder annuities. Now, you can ladder for income, but today we're talking about principal protection. If you’re curious, on our site there's a live MYGA feed, with fixed rate annuities. MYGAs are the annuity industry's version of a CD, a certificate of deposit with no annual fees, and no moving parts. It's very simplistic, and easy to understand.

You give the insurance company money and you choose the time, and the duration. Then you're going to get a specific interest rate for that specific period of time. Now, with laddering MYGAs, multi-year guarantee annuities, typically, I don't like you to go farther out than five or seven years. Obviously the longer the duration, typically the higher the guarantee. But the good news about that is you have money coming due, starting in year three, and then in year five and year seven. And hopefully we can transfer that non taxable event to a higher fixed rate. Or you can just get your money back and move on and do what you want.

The other ladder that we're doing a lot of is a three, four, and five-year ladder. So a three-year MYGA, a four-year MYGA and a five-year MYGA, keeping those durations short. I always tell people if you're deciding between this duration and that duration, choose the shorter one. Currently there's a situation where there's some A plus rated carriers that typically aren't in the MYGA world, that aren't competitive. But for some reason, they've come out and they're very competitive at the seven year level.

So a lot of people say, "Well, heck, they're A-plus rated. Let's go get that seven year piece of paper." That makes sense. There's specific times, but most of the time you should be more cautious and choose the shorter duration because you always want money coming due and accessible. You don't want to lock in for the longterm.

Okay. So what I was talking about was a fixed rate ladder we use in MYGAs. There’s another CD product out there that I know that agents probably don't tell you is a CD product. It was designed in 1995 to compete with CD returns. We are talking about an indexed annuity, or fixed index annuity. I know way too many stories of people who have gone to the bad chicken dinner seminar, or you might have an agent advisor that said, "You're going to get market upside with no downside." Well, if that was true, then the fed would just buy index annuities period, because that's a good deal market upside with no downside. It doesn't work that way.

Typically, the blended return is a CD type level. There's absolutely nothing wrong with that in a laddering strategy. If you would like a bit more yield than that, I can't guarantee it. But with index annuities, there's a potential that you might get a little bit better than CD returns. So what we do is we will create what's called a mixed fixed ladder. You're mixing the two fixed rate type annuities, two fixed annuities, MYGAs, multi-year guarantee annuities and fixed indexed annuities. If it's a mixed, fixed ladder, which is MYGAs and indexed annuities, you don't attach an income rider to an indexed annuity, and there's no annual fee. So 100% of the principle is protected and there are no annual fees. With 10,000 baby boomers retiring or hitting that retirement age every single day, a lot of people are looking for contractual guarantees. They're looking to not lose a penny.

Now, when I say that, I need you to be rational. I need you to know that while you may not get the greatest returns, your principal with be very well protected. If you’re at that principle preservation stage of life where you don't want to lose any more money, laddering fixed rate annuities or laddering fixed rate annuities and index annuities together, can provide that principal protection with the return scenario that I think you'll be really happy with.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.


Share: