Finally, you can get a bigger bang for your retirement bucks with an all-new competitive CD alternative in the form of a multi-year guaranteed fixed annuity (MYGA). A MYGA is similar to a Certificate of Deposit (CD) in that it earns a fixed amount of interest and pays out after a specified period of time. The key difference is it is an insurance product, not a traditional savings vehicle, that can be used as an important part of a retirement income planning strategy.
The fact is, the rates on CDs over the last several years have been nothing short of abysmal. The rates in January of 2011 were 0.48% for a one-year CD and 1.57% for a five-year CD.* The current CD rates, as of June 7, 2016, sit at a measly 1.09% for a one-year CD and at a lowly 1.63% for a five-year CD. See the chart below to view the CD rates over the last five years.
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The initial interest rate is effective for annuities issues as of June 6, 2016, for the first five contract years only. Thereafter, the issuing company may declare at its sole discretion a new rate, which could be lower. This initial rate is also subject to change at any time in the issuing company’s sole discretion for new contracts. There is a 30-day window at the end of each five year guarantee period where a policy owner may withdraw all or part of the annuity value without application of surrender charges or market value adjustment. A new guarantee period and surrender charge period will begin after the end of the previous ones.
*Source for CD Rates: http://www.bankrate.com/finance/cd-rates-history-0112.aspx