Whether you are looking for the right financial product to purchase with a windfall or you are planning for your retirement, you have access to a wide variety of options — so many, in fact, that making the right choice can feel difficult. A multi-year guarantee annuity is just one of many options for your money, and if you believe that this may be the right investment for you, be sure to consider the following before buying your MYGA.
How Do Multi-Year Guaranteed Annuities Work?
A multi-year guarantee annuity is similar to a certificate of deposit in that you inject your money and then agree to a term during which it sits and grows. If you access it early, you may pay fees or other penalties. In exchange for not touching the money, you will receive a guaranteed return, which can make planning for your future much simpler.
Consider Your Retirement Horizon
One of the most important tips to keep in mind before you buy a MYGA is how long you have until retirement. For young people, the horizon is often long enough that your money would perform better and achieve higher returns in other vehicles such as a portfolio of ETFs or mutual funds. However, for those nearing retirement age, a MYGA account can offer a safe place with guaranteed returns so that you are sure your money will not be consumed by a market downturn right before you exit your job.
Evaluate Your Needed Return
As mentioned previously, part of the consideration that goes into whether a multi-year guarantee annuity is right for you is going to be the return that you expect or need. In exchange for a guaranteed return and the stability offered by a MYGA, you can expect lower returns on average than you would in the stock market. MYGAs are considered conservative investment vehicles, so if you need a very high rate of return in order to achieve your goals, you may need to shoulder more risk and choose something other than a MYGA. If you are risk averse and are willing to see slightly lower returns as a result, a MYGA may be a good choice for you.
Do Not Forget The Fees And Other Features Of The Product
Financial institutions and other companies that offer MYGA products will each have their own terms and conditions, such as the interest rate that you will achieve, any fees or commissions paid, requirements for the disbursement of your funds and so on. Be sure to consider all of these factors before buying your MYGA so that you can make an informed decision and do not lose some of your gains on fees later in the process. Also, be sure to choose a reputable company so that you can feel confident that the provider will not go out of business before paying your annuity back to you.