Safe Money
Can Your Safe Money Work Harder?
You’ve worked too long to accumulate your savings to take risks you aren’t comfortable taking . But avoiding stock-market risk doesn’t necessarily mean settling for very low returns. If you have money sitting in CDs, savings accounts or an existing annuity, there may be alternatives offering competitive guaranteed interest, tax advantages and access to your money – without exposing your principal to stock-market losses.
Before We Talk About Products, Let's Answer One Question.
What is this money for?
Over the years, I’ve found that retirement savings generally has two eventual destinations: you will spend it, or someone else will inherit it. That sounds overly simple, but the answer can completely change how the money should be positioned. If you’ll eventually need it for income, we should plan for income. If you probably won’t need it, we should consider legacy. And if you don’t know yet, flexibility becomes particularly important. The product comes after the purpose.
A CD May Be Exactly Right for You.
CDs are straightforward, FDIC-insured within applicable limits, and familiar. But they aren’t the only way to protect money. Depending upon current rates and your circumstances, other guaranteed products may offer advantages worth considering. That’s why I believe the question shouldn’t be ‘Are annuities better than CDs?’ It should be:
Which is better for this money?
What Is a MYGA?
A Multi-Year Guaranteed Annuity – or MYGA – is an insurance contract that provides a guaranteed interest rate for a specified period. Depending upon the contract, important differences from a bank CD can include tax deferral, competitive guaranteed rates, limited penalty-free access to money, and principal protection from direct stock-market losses.
MYGAs aren’t appropriate for everyone. They have surrender periods, insurance-company guarantees rather than FDIC insurance, tax considerations and rules concerning withdrawals.
That’s why we compare rather than sell.
What About My Existing Annuity?
Some people purchased annuities years ago that are now earning relatively little or no longer fit what they’re trying to accomplish. That doesn’t automatically mean you should replace one.
Replacing an annuity can involve surrender charges, a new surrender period, tax considerations and loss of valuable existing benefits. But it may be worth reviewing.
- What do I have?
- What is it earning?
- What benefits would I give up?
- What alternatives are available?
- Does changing actually improve my position?
Eventually some retirement savings needs to become retirement income. Certain annuities can create guaranteed lifetime income designed to continue regardless of how long you live. That doesn't mean all your money belongs in an annuity. It means we determine how much dependable income you need and then decide which portion of your savings - if any - should help create it.
If you have a CD maturing, money earning less than you'd like, or an annuity you haven't reviewed in years, don't start by asking me, 'What's your highest rate?' Rick, here's what I want this money to accomplish. Then we'll compare the choices. Sometimes the answer may be a MYGA. Sometimes another annuity. Sometimes keeping the CD. And sometimes doing absolutely nothing. The objective isn't to buy something. The objective is to make a good decision