Some retirees in Paducah chose a solution for their short-term, safe-money needs in Multi-year Guaranteed Annuities.
Bradshaw & Weil Wealth Management believes Multi Year Guaranteed Annuities could be an option for
their financial advisory firm in Paducah. In 2008 Interest rates began to tumble downward leaving many
retirees in Paducah subjected to reinvestment risk. Each time a fixed rate annuity or Certificate of
Deposit (CD) matured for renewal, the retiree was faced with a lower interest rate, which reduced their
annual retirement income. By 2012, the five-year interest rates on CDs were hovering just above .50%.1
The low interest rates coupled with a rising inflation rate on necessities left many retirees in Paducah
with a negative real return on their CD investments. Many investors began to search for alternative
short-term, safe-money investing solutions in Paducah.
Some retirees in Paducah chose a solution for their short-term, safe-money needs in Multi-year
Guaranteed Annuities, also known as MYGAs. MYGAs are fixed annuities that guarantee a declared
interest rate for a pre-set number of years. These types of fixed rate annuities are issued by insurance
companies with surrender periods.
MYGAs are similar to CD’s, which are issued primarily through the bank industry. The similarities
between these two products could be: short- to mid-term investments, declared interest rates for the
duration of the product’s term, and being classified as safe money investments. Several retirees use
these products as short-term accounts during retirement and as an emergency fund. Comparing
MYGA’s and CDs would be like comparing a zebra to a horse, even though they look similar they are very
much different animals. Some differences between MYGAs and CDs are tax-deferral versus annual
taxable, allowing for additional deposits, liquidity options during the product’s term, offering a lifetime
income option, and beneficiary solutions on qualified accounts. MYGAs offer most of the features that
CDs offer plus many more.
Typically, MYGAs offer higher interest rates than CDs, but that is not the only factor investors in Paducah
want to evaluate when considering these two investments.
Brandon Morgan with Bradshaw & Weil Wealth Management said that he is often asked, “Which safe-
money investment is right for me”? Brandon Morgan went on to say that annuities offer more features
and flexibility than CDs, but that does not always mean that they are the most appropriate investment
account for safe-money investing. Typically, investors in Paducah that are in their accumulation years
will purchase CD’s while, people nearing retirement and retirees will opt for MYGA’s.
Mostly, the reason annuities could be a better option for those who are age 59 1⁄2 or older; or for those
who do not intend to withdraw all interest or principal (on IRAs) until normal retirement age, is that they
can be subject to IRS early withdrawal penalties. No matter if the owner has funded with pre- or post-
tax dollars, the owner can be penalized by the IRS if taking withdrawals of taxable dollars before age 59
1/2. The IRS early withdrawal penalty does not apply to owners older than age 59 1⁄2 or the
beneficiary(ies) of the MYGAs when the owner passes regardless of their age.
Another reason Brandon Morgan, of Bradshaw& Weil Wealth Management says MYGA’s could be ideal
for retirement, would be due to the Triple Compounding. With a MYGA’s tax deferral benefit the
investor receives compounding interest: interest on the principal, interest on the interest, and interest
on the tax-deferred earnings. Brandon also said that interest will compound through tax-deferred
growth each year and accumulate more quickly than a taxable CD.
If you would like to learn more about MYGA’s and your retirement, please call 270-444-7291 to
speak with one of our investment advisor representatives or click http://www.bradshawweilgroup.com/wealth.html .
Investment advisory services offered through Virtue Capital Management, LLC (VCM), a registered investment advisor. VCM and Bradshaw & Weil Wealth Management are independent of each other. For a complete description of investment risks, fees and services, review the Virtue Capital Management firm brochure (ADV Part 2A) which is available from your Investment Advisor Representative or by contacting Virtue Capital Management. Information provided is not intended as tax or legal advice, and should not be relied on as such. You are encouraged to seek tax or legal advice from an independent professional. The information presented does not does not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to project the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.