You know me, you trust me, and you know I'm going to tell you the truth. Today's topic is Retirement Withdrawal Strategies. We're talking about MYGAs, Multi-Year Guarantee Annuities. So, we’ll go through how you can use MYGAs for your retirement withdrawal strategies.
What are Multi-Year Guarantee Annuities? As my ultra-smart CEO always tells me, she goes, "Stan, it's not a CD; it’s CD type." She's right. A Multi-Year Guarantee Annuity is a CD type. CDs are great. We don't sell them, but they're great.
They're guaranteed an annual interest rate for a specific period. The annuity industry CD type is a Multi-Year Guarantee Annuity. Now, you can click here to see live rates, click it, and then, poof, it pops up; you get two dropdowns, put in your state of residence, and then put in the duration you want to see. Three or five years, you can go back and forth and see them all—3, 5, 7, 10, whatever, two. And, you'll see the highest contractual guaranteed yields for that duration that you choose. It's listed from top to bottom, from the highest yield on down. And then, you can see the ratings and all that stuff.
Now, when it comes to retirement withdrawal strategies, some Multi-Year Guarantee Annuities allow you just to peel off the interest as you do with the CD. You just peel off the interest, hit your bank account, and never touch the principle. Some don’t allow that, but they will allow you to take out, say 5% per year, penalty-free withdrawal, or 10% per year, penalty-free withdrawal.
So, when you're looking at retirement withdrawal strategies, and you need some income to come in, a lot of you go out there, "Hey, Stan, I don't want to lose a penny. I worked hard; I’ve saved, I've scraped, I've sacrificed. I want my money to be intact, and I just want to peel off the interest." Then Multi-Year Guarantee Annuities work. Now, at the time of this taping, look at the date, look down there at the time of this taping, interest rates are at perceived lows, and compared to Jimmy Carter’s interest rates, they are at lows. But, it is what it is. I mean, it's based on interest rates at the time, current interest rates, and the ten-year treasury at the time of this taping is pretty low. Could it go lower? Yeah, it could. I hope it doesn't.
I hope rates will go up for all of you retirees and the 10,000 people hitting 65 every day, a demographic tidal wave. But, it is what it is. One of the questions I get all the time from a retirement withdrawal strategy question using MYGA's, is why are MYGA rates higher than CD rates? I mean, if an MYGA's a CD type of annuity, then why is it higher? It's because of a dynamic pricing model. Life insurance companies issue annuities. Life insurance companies then issue Multi-Year Guarantee Annuities, but life insurance companies have numerous trenches of business that they price off. A lot of them sell life insurance, and a lot of them sell lifetime income products, like immediate annuities. They also have bonds that are not callable.
I mean, they have them that aren't callable, that are at high percentage rights, and then so they take all of that, plus the current interest rates, and they can price these guarantees to be higher than CDs, at the time of this taping, because it's a dynamic pricing model. So, with retirement withdrawal strategies, if you don't want to touch a penny of the principle and you just want to peel off the interest, on my site, pull up my live MYGA feed; within those columns, we will list if you can take out the interest, or we will list if you could take out a specific percentage annually. I mean, it's very transparent. These are commodity products, not one's better than the other.
And I have said, "Okay, for this duration, I sign off on this carrier." So, you'll see A plus carriers, A double plus carriers, A minus carriers, B plus carriers, and B double plus carriers. And, I know what you're saying, "Well, why would I buy a B double plus carrier and a B double plus carrier?" It's because we're only marrying them... Like getting married. We're only going to be with them for that specific duration. It's not like buying a lifetime income product. So, there are occasions where a two-year MYGA with a B plus, or a B double plus company, makes sense, and I sign off on it. But, from a retirement withdrawal strategy, you can buy MYGA's and peel off the interest or take out a specific percentage, depending on that specific offering, to satisfy those income needs or that money you need hit in your bank account every single month.
With MYGAs, you can use them in Roth IRAs, non-IRAs, and traditional IRAs. So, many times people ask me, "Where should I take the money from first? Should I take it from the IRA or the non-IRA?" There are no good answers to that, just bad sales pitches. It comes down to your specific situation. I would encourage you to set a time with me to talk.
Another question I always get is, "Which is the best? Which one's the best to take from, et cetera?" There is no best or best MYGA, the best duration, and the best carrier. It comes down to what you're trying to do. A lot of times, we do ladders, where we're laddering... If someone had $300,000, we’d do a hundred thousand in two years, a hundred thousand in three years, a hundred thousand in four years. The other question I get a lot of times with MYGA's is how about the required minimum distribution stand, re RMDs. At the time of this taping, that's age 72. They have raised it from age 70 and a half to age 72. So, when do I take it, or should I take it from Multi-Year Guarantee Annuities? Remember, with RMDs, and you know this, I'm just going to repeat it for the people that don't know; this is good for you to know. With your IRA assets, the IRS doesn't... They don't care if you take it in proportion; with every single investment in your IRA, all they want is the percentage.
Now, some Multi-Year Guarantee Annuities are RMD friendly. Some are not, and some are not set up for that. So, you have to be just upfront with me when you set a time to talk with me, "Hey, Stan, I'm going to buy this MYGA, but it has to be RMD friendly, because I'm planning on taking my required minimum distributions from that MYGA." So, we can do that. Not all of them are perfectly set up for RMDs, but many of them are.
The key here is that I'm trying to educate you so that you can make an informed decision on your terms and timeframe. There's no hocus pocus; there’s no Stan-Henge. We're doing facts when it comes to annuities.
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.