MYGA vs. CD
MYGAs and CDs are offered compared to each other as their offers can be very similar. Below you’ll see the nuances and differences of the typical offerings.
|– Usually provide higher yields with better tax benefits||– Typically lower yields compared to MYGAs, but offered for shorter terms|
|– Tax deferred growth; don’t pay taxes until you withdrawal the amount||– Interest gained from CDs are taxed annually.|
|– Common to offer a death benefit option||– Pay out the principal and interest to beneficiaries|
MYGA vs. Fixed Annuities
MYGAs are sometimes referred to as a Fixed Annuity, but there are some intricacies laid out below.
|– The rates offered are usually slightly higher||– Typically offer less yield, but more liquidity|
|– Less liquid as the terms are typically longer||– More liquid as some terms are as low as 1 year|
|– Surrender charges for early withdrawals (at Pillar, we only enforce surrender charges after the first year of your term)||– Also impose surrender fees, but usually decline over the span of the term|
|– Partial withdrawals may be allowed penalty-free (at Pillar, you can annually withdraw up to 10% of your account value)||– Early withdrawals may impact future income|
|– Tax-deferred growth||– Tax-deferred growth|
MYGA vs. Treasury Bonds
See the comparison between MYGAs and Treasury bonds, including tax benefits, interest rates, contracts, and more.
|– Generally higher yields for similar terms||– Typically lower yields for similar terms|
|– Rates are fixed for the entire term||– Interest is paid semiannually at a fixed rate based on action results|
|– Tax-deferred growth until withdrawal and taxed as ordinary income||– Interest is exempt from state and local taxes; federally taxable|
|– Less liquid and typically have surrender charges for early withdrawal||– Highly liquid that can be sold at any time on the secondary market|
|– Low risk to principal when held to term||– Low risk to principal when held to term|
|– Backed by the contract issuer and state||– Backed by the full faith and credit of the US government|
MYGA vs. SPIA
MYGAs are fixed-term investments while Single Premium Immediate Annuities (SPIA) the annuitant is immediately able to convert a lump sum into guaranteed lifetime income.
|– Typically do not provide any payouts during the accumulation phase||– Immediately able to begin lifetime payouts after the lump-sum premium is paid|
|– Surrender charges on withdrawals made before the end of the term (at Pillar, you can annually withdraw up to 10% of your account value)||– Severe withdrawal limits, or simply not allowed, to discourage spending down the principal.|
|– Death beneficiaries receive the pay out of the accumulation value or guaranteed minimum value||– Most SPIA income payments stop upon the annuitant’s death; some may refund the unused premium|
|– Fixed rate over the term length||– Payout rates depend on age at purchase and current fixed income rates|
MYGA vs. Fixed Indexed Annuities
At a high-level, MYGAs offer simplicity with fixed, guaranteed returns over a set period. Fixed Indexed Annuities offer a bit more flexibility.
|MYGA||Fixed Indexed Annuities|
|– Fixed interest rate for the length of the contract term||– Earn interest based on the performance of an index, the S&P 500 for example with capped earnings|
|– Guarantee of the principal||– Guarantee of the principal|
|– Surrender charges for early withdrawals (at Pillar, you can annually withdraw up to 10% of your account value)||– Partial withdrawals are allowed; the percentage or amount is contingent on the agreement|
|– Do not provide lifetime income payouts||– Annuitization is allowed|
|– Pay a death benefit to beneficiaries||– Common to offer living and death benefits|
MYGA vs. Bond Ladders
Which is more important to you, flexibility or guaranteed growth? Bond ladders can provide more flexibility and diversification, but MYGAs offer guaranteed and consistent returns.
|– Guaranteed, locked-in rates of return and depend on a single insurer||– Allows for investing across multiple bonds of varying maturities|
|– Surrender charges for early withdrawals (at Pillar, you can annually withdraw up to 10% of your account value)||– Individual bonds in a ladder are liquid and can be sold on secondary markets|
|– Generally offer slightly higher rates for similar durations||– Usually provide a mix of varying yields|
|– Tax-deferred growth until withdrawal, enabling compounded growth||– Pay taxable interest yearly|
|– Fully taxed as ordinary income||– Preferential capital gain tax treatment|
See how much you can earn with a MYGA
MYGAs are considered a safe, reliable vehicle for your money because they offer guaranteed growth as they are low-risk. This is because:
- MYGAs are shielded from market downturns, guaranteeing a steady, reliable return.
- MYGAs are flexible and hands-off.
- MYGAs can come with benefits or riders that secure your money for a beneficiary if something were to happen to you.