Multi Year Guaranteed Annuities

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You're listening to the Truth Network and truthnetwork.com. Welcome to Finishing Wealth, brought to you by cardinalguide.com, with certified financial planner, Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Wealth, we'll examine both biblical and practical knowledge to assist families in finishing wealth, including discussions on managing social security, Medicare, IRAs, long-term care, life insurance, investments, and taxes.

Now let's get started with Finishing Wealth. Well, welcome to Finishing Wealth, certified financial planner, Hans Scheil. And today's show is actually being titled The Financial Prayer, with our prayer being that all of us would come to understand some of these investments better, and that God would sow into us.

And, you know, we have our head financial planner here, Hans Scheil, to help us. But we're going to learn today about what a maga is, and so don't let that stump you for now, because we're going to get right into the prayer, and then we'll go on minas and magas. And so, Jesus, thank you for the investments that you've made in us, not only financial, but in the many gifts and talents and all the different ways you have provided for us. And Lord, we pray that you would help us be a good steward of those things, that we wouldn't be fearful, like the evil wicked steward, and that we would trust your heart, that you're going to give us interest, you're going to give us power over the things that you've made us fully capable to understand and fully capable to invest in. So, when it comes to this very specific thing that we're learning today, Lord, give us wisdom, give us your understanding to know how we can be good and faithful stewards, that you've entrusted us with little and that you would feel comfortable to entrust us with more. And we ask this in Jesus' name. Amen. So, you may be familiar with the story of the minas in the Bible.

Some people call it the story of the talents, depending on the translation that you. But for today's episode, because we're going to be talking about magas in a minute, you need to know about minas. Okay, so a MIGA, M-Y-G-A, Multi-Year Guaranteed Annuity. And first off, I've known about magas and worked with magas for well over 20 years, and it's just a terrible name. I mean, it's just an acronym or a name is supposed to be descriptive and understandable, and people are like, what in the world? Even people in the insurance business and the financial business is like, what's that?

So we were going to change it, but I said, that's not going to accomplish anything. And so it's a multi-year guaranteed annuity. And for the purposes of understanding it, it very closely resembles a CD or a certificate of deposit at the bank.

There's some clear differences, and I'm going to point them out, but I just did a video that's out and it's generating a lot of inquiries. We have a lot of money that's moving into these products, small amounts, large amounts, and really so notable that there's a real demand for this because it's just paying up a better interest rate than the CDs, which is not very hard to beat them now. Are we going to get into Menas?

And so those are for the, Robbie created this right out of the sphere of the moment. So that's, Jesus referred to the Menas, it's money invested in a noteworthy Adam. As the story of the Menas went, before we get to the Migas, you might remember that, you know, Jesus, both in Matthew and Luke, the stories told in the Gospel several places where he had these servants and he called them all together, 10 of them, and he gave them all 10 of these Menas and told them to go invest them. And he was going to go off to a far country and he called them all in at the end of the deal. And the first guy said, oh, you know, I invested your 10 Mena and I got 10 Mena more. And he was like, oh, well done, good and faithful servant. I'm going to give you 10 cities to be in charge of.

It was wonderful. The same thing with the second guy, he got five Menas back for his, you know, 10 Menas and it was, you know, he's going to give him charge of five cities. Then there was the poor guy that honestly I find myself in many times that just said, well, you know, I knew that you were a hard man and that you reaped where you didn't sow, so I took the safe route and I didn't invest the money.

I hid it in a handkerchief and, you know, here's your money back. And of course, he was met with a horrible rebuke. And you can't help but wonder why was Jesus, why was this master so angry with the servant? Well, because he worked out of fear and there was no faith that he had what it took to invest the money or no faith that the master would hold him up, you know, no matter what happened, but in other words, worked with him. And so as we get into this show today, you know, we are all entrusted with many talents than Menas, right? And so how are we investing those for his kingdom? In other words, you know, how are we going to be able to say with what you entrusted me, this is how I trusted you back by investing it wisely, by using it for the kingdom, you know, what exactly does that look for? And so, you know, I'm excited about, A, our prayer that God's going to answer it and B, how, you know, Hans has a little bit to share along these lines because we had a lot of people that are holding on to a lot of money right now. Yeah. Okay. So there isn't a lot of boring financial content for the show.

In fact, there's not enough content really, if we're just going to explain what Amiga is. So let me just give you an example of what we're offering right now and what people are buying a lot of is a five-year annuity. I don't want to name the insurance company because it just brings a whole bunch.

It's a large, well-rated insurance company. And so what you're doing is if you put $100,000 into this thing and you agreed to leave it there for five years, so very much like a five-year CD, you're going to earn 3.35% interest for every year of those five years. Or in other words, you're going to have close to 18% increase or accumulated. It doesn't have to be 100,000. It could be 20,000. It could be as little as 10,000. Some of them will go as low as five. This particular company, it's 10 and we've sold several of these in the amount of a half a million dollars. I mean, when I say several, it's more than two or three. I don't have the exact number.

I don't do that. But we've had a lot of people, the maximum that you can put in any one of these is a million dollars. But when we have somebody that wants to put in more than that, we'll just move them around a few companies. But $100,000 is a typical amount, $50,000, $200,000. And we're not suggesting for a second that people put all their money in this thing.

No way. And we're also not suggesting that 3.35% is something you're going to go up and climb a hill and stand up at the top and rejoice and throw a party over. I mean, it really doesn't sound like that much. But when you really compare this to what the banks are offering on CDs, now there is a real big difference between an annuity or a MIGA and a CD in that you're going to pay taxes on the little rate that you're earning on your CD. You're not on an annuity interest rate until you draw it out. I mean, sooner or later, you're going to have to pay the taxes on this gain.

But you can postpone it a long time. It's what we call tax deferred. So if you did put $100,000 in there, at the end of the five years, if you got close to $118,000, all of that's going to be in there. And you will have not paid taxes on that $18,000 yet. So if you cashed it all in, you'd owe the tax right then.

If you rolled it over into another type of annuity, I mean, you can do that for the rest of your life and let your kids pay the taxes or whatever. Long term health care, you know, a home health care program. There's a lot of reasons that we talk on this show all the time, economics of why interest rates are so low. And I simply wanted to just tell a few stories about clients.

But you know, these stories are not, I'm telling them, because they're not that unique. I mean, the balances that I see in checking accounts. And I learned the amount of money people have in there, because I'm doing financial planning for a lot of my clients, or at least talking about it, and getting in the facts, or at least starting that where we have a Medicare supplement client or a long term care insurance client, and then we're moving down that direction.

And people have $50,000, $90,000. And, you know, the first story is one of my clients has been with me for now seven years. And the whole seven years, she's had between $55,000 and $60,000 in her checking account.

Okay. And, you know, I check in with her about every year, and I helped her take in a fairly large inheritance that really affected her net worth. And I really structured everything so that she could really pay zero income tax. I mean, I just put stuff in annuities and tax deferral, and we paid off the mortgage out of her on her house so that she, you know, she didn't have that payment anymore. But she didn't have to worry about the mortgage interest deduction.

It's just a lot of complicated stuff. But we did all this, we did all this, and the whole time, she's just got this $55,000 to $60,000 grand sitting in the checking account, just out to see her a while ago. And she had withdrawn $20,000 out of an annuity, just kind of because she could, she wanted to spend it and do some nice things for her kids, which is, you know, her right and her prerogative. But what it did is she had to pay taxes on this withdrawal, or at least the portion of it through all her financial plan out of whack, when she could have just taken this $20,000 out of her checking account, and then she would have gone from $55,000 to $35,000. And the money would still be in the annuity, she wouldn't have to pay any taxes. And $35,000 is still too much for this lady. I mean, her cash flow doesn't vary that much by month to month.

She bought a new car, she financed it, I helped her do that. And so it's just, it's a real universal problem that I want to talk about. And I'd really like to have an effect on some people that I think as stewards of your money, you, you know, if you've got some options that can get you two to 3%, 3.35%. And you've got large balances sitting there at less than one. And it's not money that you need to get tomorrow.

We ought to have a conversation about that. Right, you're listening to Finishing Well with Certified Financial Planner, Hans Schall, today's show. We're talking about investment in prayer. And it is a prayer for all of us that we would be good stewards and see the best possible use of the money that he's entrusted us for the kingdom. And of course, this is all available in Hans' book, The Complete Cardinal Guide to Planning for and Living Retirement, which is available at cardinalguide.com. You can go to cardinalguide.com. Hans would love to hear from you, email him. When we come back, more stories and more ways that we can be praying to be good stewards of our financial resources in this investment prayer. Hans and I would love to take our show on the road to your church, Sunday school, Christian or civic room. Here's a chance for you to advance the kingdom through financial resources by leveraging Hans' expertise in qualified charitable contributions, veterans aid and attendance, IRAs, social security, Medicare and long-term care. Just go to cardinalguide.com and contact Hans to schedule a live recording of Finishing Well at your church, Sunday school, Christian or civic group. Contact Hans at cardinalguide.com.

That's cardinalguide.com. Welcome back to Finishing Well with Certified Financial Planner, Hans Scheil. Today's show has been really a financial prayer that we would all be good stewards. And we're comparing this minas to maygas, which, you know, I just found out from Hans again that that means multi-year guaranteed annuity, my guh, as opposed to the mina, which we talked about at the beginning of the show, which is money invested in a noteworthy atom. Anyway, so I know you guys, as we were talking about these, you know, the great news is you got this 3.35% compared to... Well, the story I was telling before the break of the lady that's maintained between $55,000 and $60,000, the whole seven years I've been working with her, whenever I start talking about that money, I mean, it's like, well, that money has to last me the rest of my life. And, you know, well, okay, it looks like it's doing pretty good.

I mean, you've made it through the last seven years, and there hasn't been a dent in it. And you also, you've been learning earning one-tenth of 1%. So 1% of that would be 500 bucks, right? Yeah, 560 bucks.

One-tenth of that, you've been earning 56 bucks a year on your 55 to 80, and you've got total liquidity. You can go get that anytime. And I've watched her look up her balance on her smartphone.

And this is a lady that claims not to be good with technology. But, you know, so I understand that and respect that there's a certain satisfaction. As I know about that money, it's there. I can go get it. It gives me security. What I would propose to her, and I'm going to propose to her when I can get over there and do it. Let's take half of it, $30,000 and put this in one of these MIGAs.

Okay. And if we took 30,000 and put it in this 3.35% interest MIGA, then you would only have 25 to 30,000 available that you could go put your hands on quickly, which is still a substantial amount of money. And then you would have 30,000 earning you a substantially more interest. It's about a thousand bucks a year. And to boot, you don't have to pay taxes on the thousand right now. So over five years, that's going to give you a $5,000 increase on the 30 grand.

So you're going to have 35 in that. Right. And if the five year thing got to her, she could try it for two years just to see how that feels and roll that over into the five year deal.

And she goes, Oh, that wasn't hard. Yeah. And it kind of scares me to offer that to her because she would definitely hope that.

Yeah. Have you got a one year deal? How about a six month deal? And she doesn't need that much money liquid is what, you know, what my advice to her is. And my guess is that many of you fall in the same equation. I just have tons of seniors that, you know, the amount varies a little bit.

I have another client, been a client about nine years. She has between $100,000 and $150,000 in her checking account or somewhere between her checking account and her money market, which is bad, that much different. That's been the same the whole time I've known her. In fact, if that ever dips down to the low end of that range, she's on me, you know, wanting to know how she can draw some money out of her other investments of the stuff that I'm managing for. This lady is very well to do.

And this is a privilege. But as you just, you look at the opportunity cost of that money, sitting in the bank, it's just, it's troubling. Now, she also is a candidate for these. Because she has within her investments that we're doing for her, she has a very conservative allocations.

And she's coming in and giving me a hard time about those. Because she's earning, you know, one to 2%. And then they can actually lose money bond allocations. And that's over on our investment side. But we have several people on the investment side that have liquidated stocks, they've moved into cash. And so they have large amounts of cash, or large amounts of low yielding bonds. So the conservative part of their investment portfolio has gotten smaller, excuse me, it's gotten larger, the conservative portion, they're just sitting on a lot of cash. And that's where these large migas are coming from, is people that were either taken on as new clients in the Medicare and long term care area, and we're starting to handle their finances. And they're going to open up with putting their cash or some of their cash in one of these migas, maybe spreading them out and laddering them like having a two year, a three year, a four year and a five year, so that you got a little money coming due every year, a lot of money coming due every year, are some ways you can deal with the length of these things.

You know, it's something that I really want to make the whole world out there aware of, as just another alternative. It's not something we're pushing on everybody or say, put all your money here. Basically, this is where you move idle cash. And, you know, Right, times are changing. I mean, at one point in time, you know, sure, this is where you would put your savings or this would be where you have a CD. You'd put it in a CD.

That's what I was gonna say is this. That's where this money is. And a lot of these folks that have these large balances have them because CDs are so unattractive. So years past as they've developed this, as they've accumulated money, every so often, they'd go down and put that $30,000 into a CD, just so they get a little better interest rate, but the rates are so low. They're just saying what's the use they leave in their checking account, even within IRAs. I mean, these annuities will take IRA money. So if you have a bunch of cash in your IRA, or you have a bunch of just low yielding, safe investments that are very low, and you don't really have any guarantees with them that they could go down as well. This can't go down.

This is just all laid out like a CD. You know, you give us a call. I mean, you know, we'll talk about it. So essentially, I wasn't aware. There's people that have IRA money that is very low yield as well.

Oh, yeah. Well, you can have cash in an IRA. There's a lot of people that cash out of the market at different times. There's people that have high amounts of cash in their 401k, because the market scared them at some point. I've got stories in my book about that.

I mean, we run into that all the time. People coming into us, they got IRAs, and they got other investments. And within the scheme of things, they got way too much cash. And now, they haven't been getting very much on their cash for a long time.

But now it's even less than not very much. I mean, it's just because of the current time interest rates are so low, they're almost at zero. And these insurance companies, if you're willing to tie up your money for the specified period of time, they're going to give you a pretty good rate. It doesn't really cost them much to issue the policy. You're not going to have to pay any commissions to us. The insurance company pays us a fee to essentially promote this and explain it to you. That doesn't come out of the 3.35%.

We need to talk about some of the downsides of these. Well, before I do that, one last question. So if I had done that, I had a 401k, and the market scared me, and I drew out $300,000, and it's sitting there. I haven't paid tax on it, right?

And so that is something that's available to roll into this type of a MIGA, but it needs to be an IRA MIGA. Yeah, we can handle all that for you. So what happens if I want to get at my money in two years? So you asked me this question, and it's really funny. If I want to be a smart aleck, I mean, the lady in the story, she hasn't touched the money in seven years. But yeah, what happens if you want to get at the money, you're going to have a penalty, just like you would in a CD. Now, if that concerns you, first of all, don't buy the five-year, buy a two-year, or buy a three-year, if you think there's a high probability.

But if it just lightly concerns you, like you might want to get into your money, then don't put all your money in this. Just put, like I gave in the example, put half your cash, or put 40% of your cash. Well, you said that there was a way that you could actually buy some margin on that, too, where you can get 10% out per year and take a little bit lower rate. And take a little bit lower rate, if you knew you were up against something like that. There's several riders that you can buy on these policies, and the way you buy them is by accepting a lower base, a lower interest rate. So what is 3.35, if you bought a 10% surrender rider on here, instead of getting 3.35, you'll get 3.25. And by taking 0.1 less for the five years, you could take 10% of your money every year, no penalty.

Okay? And one of the cool things that you mentioned, that I, maybe it's a downside or maybe it's an upside, is that since, you know, this money, the income, that 3.35 is taxable, you can set it up so that they send you the interest every month in a check. Yeah, and it'll make it taxable. If you leave it in there, it's not taxable until you draw it out. But if you wanted to just get a check for the interest every month, you're going to have to take a little bit less interest. You're going to, on average, give up about 10 basis points or 0.1. So 3.35 would go down to 3.25. And for that, you're going to get a check for the interest every month, okay, for the whole five years.

So that would, that's an option. Another situation is putting a death warrant on these things, which is simply stating that with most annuities, if you die, your beneficiary is going to get all of the money. If you die before the term of the annuity ends, your beneficiaries are, they're not going to incur any penalties. With these MIGAs, if you lock your money up for five years and you get the 3.35 percent and you die in the third year, your kids, if they want to get that money, are going to either have to wait out the five years and then cash it in or pay a penalty. So you can buy, for 10 basis points, something on this that says, if I die during the five years, then my kids will get the whole amount.

There will be no penalty. So there's a whole bunch of features that come at a cost that are available to make this thing very liquid. Now, many of those things on longer-term annuities come for free. I mean, they're just part of the deal, that it'll pay off in full with death and you can make 10 percent withdrawals every year. So a lot of the features that come for free on a longer-term annuity, you have to pay for on a MIGA. And some people do, some people don't. Once we explain the cost of all those things and we get the appropriate amount of money, people say, I'm fine locking it up for five years, and if I die during the meantime, my kids can just wait or they can pay the penalty. It's their choice. And again, as you're listening to this, I bet you're like me going, I don't think I want to try this at home.

MIGAs and NIRAs and me. So the good news is it's all available right there at cardinalguide.com, right? It's certified financial planners.

They're fiduciaries, they're working in your best interests. But the neat thing is, wow, there's a lot to, that by listening to today's show, you know, is an answer to our prayer. That God's given us all more information as to what we can do with capital as it becomes available to us and different options, and at least getting advice to what we might could do with it and see, you know, what the downsides are.

Somebody who really is looking out to make sure that if you need liquid money, you know, that's available when you need it. It's again, cardinalguide.com. Don't forget the guide after cardinal and, you know, Hans' book, The Complete Cardinal Guide to Planning for and Living Retirement, it's all there.

But again, though, to me, one of the most precious resources is just simply Hans' email address. And he would love to hear from you if you have questions or some way that he could help you along these lines because, you know, that's an answer to his prayer. That the whole reason he does this show and invests in what he does is he really wants to see people finish well. Yeah. I want to see him make good decisions. So thank you for listening today. We'll look forward to next week. Thank you.