Revisiting MYGAS

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This is the Truth Network. Welcome to Finishing Well, 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 Well, we'll examine both biblical and practical knowledge to assist families in Finishing Well, including discussions on managing Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes.

Now let's get started with Finishing Well. Chris Hughes Finishing Well is a general discussion and education of the issues facing retirees. cardinalguide.com, Cardinal Advisors, and Hans Scheil CFP sell insurance.

This show does not offer investment products or investment advice. Welcome to Finishing Well with certified financial planner, Hans Scheil. And today, we're going to work on a subject we've talked about before and hopefully make it even more easy to understand, and that's the idea of MIGAs, or Multi-Year Guaranteed Annuities, I now understand is what that is. But anyway, on this subject, you can't help but think of this idea of the parable of the talents one more time about, you know, God in this story is talking about somebody's stewardship, you know, that we are given things, and then what are we going to do to get a return on what God's given us? And the idea is God, he really, really trusts us in that he's given us free will. And so he loves somebody that will go out on the limb for him, somebody that truly has faith, that believes that this is the most sound investment of all time is time spent in his word, time spent in his light, because there you go. Now he's going to give you something as a return on that, that you need to invest for him.

And so, but along these lines of the steward who trusts in the master's hand, Hans, you've experienced this every day? Hans Well, yeah, people coming into me, and they have large for them cash balances, money sitting in a checking account or a money market account. And last time I checked on my cash that I have sitting in there, I think I'm getting point one o interest, which is a 10th of a percent annually on my checking account. And I think that my money market account is like two 10th of a percent.

And that's at the bank with the high rate for the best rates going, which is so close to nothing is really like nothing. People come in and they do financial planning, and they want me to look through, I need to look through all their stuff. So they're getting it out. And I have a feeling that most of these people haven't talked to anybody else about how much cash they have laying around. And the balances that people have, for them are large. It's just amazing how much some of these people have. And then even within their IRA accounts, as the people have, they've, they are their 401k, or they have a, you know, a balance where they got scared of the market. And they, they have a bunch of it just sitting in the stable value fund, where they moved it out of the market, but they still kept it inside of the 401k. And they're getting, you know, significantly less than 1% interest. So what we're going to talk about today is a way to get them some more interest and still give them some liquidity on their money.

And a safe way that they're not going to lose their principal, right? Yeah. So what we're talking about is the actual name.

And we've talked about this before on the show. But I'm going to try to simplify it a little bit today. The actual name of these things is a multi-year guaranteed annuity. That's what people like me in the industry call these things. And as soon as you have four words to name something, and then they're multi-year guaranteed annuity, that in and of itself makes the thing confusing. And then you throw in an acronym and you call it a MIGA. That makes it more confusing.

So let's try to simplify this thing. What we're talking about is an agreement with the insurance company where you take a fixed amount of money. They have a minimum of $10,000 or $20,000 with most of these companies. So you've got to have that much money to get one of these MIGAs or contracts with an insurance company. And you can put as much as a million dollars in any one of these without even calling the company.

So there's a wide range in amounts that you can put in there. And it simply states it has a stated rate of interest. So like the two-year plan that I showed in my video is 2.85 percent. The three-year contract is 3.5 percent. The four-year is 3.7 percent. The five-year is 3.85 percent. And the six-year is 4.3 percent. So, and what I'm talking about years is there's a stated term, just like a CD has at the bank. So you can, you only want to tie your money up for two years, you're going to get 2.85 percent, which by the way is a lot better than 0.1.

It's like 28 times as much. So if you're willing to tie up your money for three years, you're going to get 3.5 percent interest. Four years, it'd be 3.7 percent interest. Five years, 3.85 percent interest. And six years, 4.3 percent interest. So the longer you're willing to tie your money up, the greater the interest rate that they're paying you. Wow.

Yeah, it's simple. And you know, 4 percent interest just seems unheard of. Like it's been a long time since anybody talked about that. Yeah, and that one particular company put that out there, and the expiration date to take advantage of it is June 6th. Now, and I just got their new rate on the six-year starting in June. Well, starting after June 6th is going to be 3.85. So that was clearly a special on the six-year deal.

But I wouldn't worry too much about that. With what the Federal Reserve is going to be doing in June and July, I think we're going to see a lot of these things around 4 percent and a little above 4 percent. But that particular one, we have to have an application signed by June 6th, and then we've got about a week to get it into the company and another 30 days to fund it. So if anybody wants to take advantage of that, you'll need to get in touch with me pretty quick.

But like I said, I'm a little suspicious of specials anyhow because they just put an end date to try to get people to pour in their money. The point being is you can earn substantially more interest on a very safe vehicle, which is this multi-year guaranteed annuity. And what we have a lot of people doing is doing one of these annuity ladders, or MICA ladders, where they're buying a certain amount of money.

Like in the example that I showed in the video, this guy had $500,000 of cash that he was earning basically nothing on, and nor did he want to invest it in stocks, and nor did he want to tie all of it up for a number of years. So we just, we put $100,000 in five different annuities, and we bought a two-year, a three-year, a four-year, a five-year, and a six-year, and all at once. And then, you know, he gets more interest on the six-year than he does on the two-year, but starting in two years. So if we go ahead till May of 2024, he's going to have $100,000 plus interest come and do. He can either reinvest it, or in another one of these things, or he can take it and do something else, and then every year the same thing, where these things will come do. And what a lot of people do is they just keep rolling them forward, and you're going to get a lot more interest on your money doing that than you are just letting it sit in the checking account or a savings account or a stable value fund inside of the 401k or IRA. Darrell Bock Yeah, and I really, you know, you had mentioned something in the video, which, by the way, is at Cardinal Advisors on YouTube, that I thought was awesome, was that what he was doing was creating the interest as income every month, because there was a way he could just take his interest on all those and have it sent directly to him monthly?

David Morgan Correct. And that's his plan. And they'll check for the interest every month. And, you know, so at the end of each term, all he's going to have left in the annuity is the original 100,000 that he put in there, but it's creating an income. A lot of people used to do this with CDs, but CDs have gotten so low in interest rate, people haven't bought those in years, but it's coming back in fashion with this thing. Darrell Bock And then there's all sorts of liquidity issues that really, they have solutions for those too?

David Morgan Well, they do. And I think when we get on the backside of the show, we're going to talk about, with most of these, you can take out 10% of the value, principal and interest, each year without penalty. You know, you start adding that up. You really don't have to do an annuity ladder if you just wanted some liquidity. I mean, people are tired, they have this money in the checking account for a reason.

So they could go get it at a moment's notice. And I think that allure has just gotten people having too much money. So still leave some money in your checking account, but then the money that's just been sitting there, not earning much, you know, you put it into one of these things, and you could still go get 10% anytime you want, just each year. So if you bought this six-year thing, you could actually get 60% of it out before the end of the thing, 10% a year without paying a penalty.

Darrell Bock Right. Or a few like he did, he had five of them, you know, at $100,000. So he could put his hands on $50,000, you know, in a given month, I mean, in a given year, at whatever point he did, he wanted, right?

David Morgan Well, yeah. And if he was taking the interest too, which he is doing, then it would only be the amount over the interest he already took. It's the whole amount taken out of there has to stay at 10% or less. But yeah, so I don't want to start stacking all these benefits where he's pulling the money out of there, because frankly, most people stick the money in there, and they just leave it. And then they pull it out on the back end. But all of these have these great liquidity features.

So you can just rest assured if you need to go buy something or you had some emergency come up, it's pretty easy to get your hands on 10% of the value in any of these at any given point in time. Darrell Bock Yeah, that's awesome. Well, we got to head to a break, but we want to remind you that this show is brought to you by CardinalGuide.com, where you can email Hans or, you know, get his book, The Complete Cardinal Guide to Planning for and Living in Retirement. It's all there at CardinalGuide.com.

And we'll be right back with more on the simplicity of the new Midas. Hans and I would love to take our show on the road to your church, Sunday school, Christian or civic group. 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, and today's show revisiting MIGAs and trying to simplify them, especially in times where, you know, the stock market is pretty volatile, bonds are not so hot, but oh my goodness, these are looking better and better, right Hans? Well, they are. And let me just tell you, I'm going to just try to try to explain the six-year MIGA, multi-year guaranteed annuities, six-year contract with an insurance company, and just try to simplify it as much as I can. So let's pretend that somebody has $100,000, or they maybe have $150,000 or $200,000 of cash, and they know that they don't need to get their hands on that much money all at once. And they just as soon, it's been sitting there a while, they just as soon lock it up for six years and get the highest interest rate that they can. So let's just pretend they bought just that. All right. And so now they've got a contract with the insurance company, they give them the $100,000, and they've agreed to leave that there until June of 2028.

Excuse me. Yes, it's June of 2028, six years from now. So the money is there, and it's going to earn 4.3% annualized yield.

So let's talk about some of their options. I mean, one option would be, you know, I'd like that interest in a check every month. And if that's what they'd like, you know, that's $4,300 a year, it'd be just under 400 bucks a month, a little more than 350 a month, that this insurance company would just send you, the owner of this thing, a check for that interest every single month and sure as to spend. Now, you will have to pay taxes on it if you receive it. Whereas if you left it in there, this would be tax deferred. So that's what a lot of people do is they leave the $100,000 there, and they let the 4.3% interest accumulate. And after six years, they're going to have a nice chunk of change in there in addition to their $100,000. And it's just kind of that simple. And at the end of the thing, in May of 2028, if they want a check for their principal and interest, they just tell the insurance company, they're going to send them a check.

Go ahead. I was just going to say, and then there's other IRA opportunities, you know, certainly in a Roth IRA and whatever, where you would just be accumulating the interest and perhaps never have to pay taxes on it, right? That's correct. So you can buy these in an IRA or out of an IRA. What I want to point out is that any year, any time, you can take 10% of the value of this thing in a deduction or a withdrawal and not pay any penalties. So along about the second year, you say, boy, I wish I had tied that money up.

I need some money to go buy something or to pay for something. You could take 10% of the whole value out, take it out, take a check. Now you're going to have to pay taxes on the accumulated interest because that's the first money coming out. But nonetheless, the insurance company is not going to penalize you. So the example we were talking about is you could take 10% in any year, like in this six-year annuity in the second year, we just all of a sudden need $10,000. We just take 10%, take a little more than that with the accumulated interest and more than $10,000. And the insurance company is not going to penalize you. You're going to have to pay taxes on the accumulated interest to that point.

And you can do that every year for the rest of the thing. So they've got access to your money. You just can't get all your money without paying a big penalty. So we have a lot of people take these and they buy MIGAs or MIGA ladders where they're having a series of these things so they've got something to come and do every year so they don't have to do these early distribution penalties.

I'm trying to make this simple. So the six-year thing, you buy it in June, it pays you 4.3%. You can either take the interest or leave the interest there. Your money's tied up for six years. You have access to 10% of it in any given contract year without a penalty. So you could actually get 60% of it back if you did it strategically without paying a penalty before the end. And then most importantly is if you died during this period of time, your beneficiary would get paid out immediately.

The accumulated interest plus the principal. Or the beneficiary would have the option if they liked the 4.3% just to leave it there until the end of the term and then they'd get that interest all the way to the end. It would clearly be their option.

Darrell Bock Wow. That's quite a benefit on any of those, right? They have that transfer on death situation where, I mean, here it all comes without any penalty whatsoever, right?

Gary Barnes Well, yeah. Let's say somebody's approaching retirement and they're not there yet and they've got an income now at a pretty good level and they're paying a higher tax rate and so they just want to defer some interest. First of all, they want to get more interest on their money and on their cash or their idle money. And then they want to defer the taxes.

These things are perfect because you could just have them come due after you retire or you could, if you needed to go in there and do something with it, you could just make a withdrawal in your year after retirement if you're not exactly sure when that is. And if you died in the meantime, which you've got the benefit, it's just like life insurance. It just pays out immediately to the named beneficiaries. Darrell Bock Well, am I right, and I'm just checking my own understanding, that like for somebody that was still employed or myself, right, if they took that money and put it in a Roth IRA and did the same six-year deal at the end of that six years, they would have access to the interest as well with no tax, right?

Gary Barnes Correct. That's the beauty of a Roth is money coming out of there is tax-free, whether it's originally put in principle. And when we have people buying these from Roth money, a lot of times the money's already in the Roth and it's invested in stocks or it's invested in something or maybe they got out of the stocks, they moved it over to the Roth and they didn't, you just, whatever, the money's already in the Roth. So then we just set one of these up as a Roth IRA annuity.

And you're absolutely right, is there will be no taxes due on that 4.3% or whatever the amount that they agreed to. Darrell Bock That's just spectacular, really, when you think about it, you know, compared to the way other investments are acting, you know, right this minute. I mean, it's an amazing opportunity. And I can see why, you're right, these have been really, really popular of late.

Gary Barnes Well, they have. And people wanting to get out of the market or people that got out of the market or partially out of the market on their own or people that were never into the market and they just, or they got out of it a long time ago and the money's just been sitting there earning nothing. And now that the market's going down, they're calling in and they're saying, well, I got to give me some return on this money. And, you know, we caution them that we don't want to stick all their money in these things because we don't want all your money tied up for some period of time. We just want the appropriate amount, the amount you're probably not going to use.

Yeah, it's wonderful. We can put these in any type of account. We just set up a whole separate account that's either a Roth IRA, a regular IRA. We can roll over a 401k into these. And we don't have to roll the whole 401k into these things. We can roll it over into one type of IRA account and then leave some of it in there, invest it and then just roll part of it into one of these things. Right.

And using the ladder strategy that you described for that client, right? Every year, after two years, he's going to have $100,000 that he could invest in other things if things started to look better in the market or in the bond market or wherever he wanted to go. Well, yeah.

And so this guy, this is bottom peace of mind. I mean, he's got plenty of money. And when you have this much cash laying around, he's got plenty of money. And it really got down with him is that to lose some of this money would just be very hard for him, okay?

Just psychologically and I guess financially. And to gain money isn't going to do that much for him. He just wants his money returned and he just wants a good fair return. And so he's got it with this and some awesome liquidity features. And I want everybody to know, you don't need to have a half a million dollars like the guy in the video. I mean, if you've got $20,000 too much in your checking account and you'd like to get some better interest on it, we can help you. Yeah. You had even said at the beginning of the video, because I was paying attention for me who doesn't have that much money. You had said 10,000 in some cases, right?

Yeah. There are some of these companies that will take 10 and we'll be glad to help you. We'll figure something out for you. So, you know, I get my most satisfaction helping people out that have lesser money. I just, you know, because I like, I don't charge them fees. Some of the wealthy people, I don't charge fees either because they're buying insurance products, but I do my work pro bono for people that don't have a lot. And I get, I get a lot out of that and most of them are so appreciative.

Oh yeah, that's absolutely spectacular. And that's the whole idea of the parable of the talents, right? That just, you know, being a good steward of whether it's, you know, $5,000, 10,000 or whatever it is, it's worth having that discussion with you because, you know, right now, you know, just there's a lot of scary investments out there, right?

There are. And just the whole people's understanding, all people have done for the last 10 to 12 years that are invested in stocks has made money. I mean, you've had some flat years kind of mixed in there, but it's just been nothing but a party. And I've noticed a lot of people getting pretty kind of full of themselves, like they're geniuses, you know, picking stocks. And boy, that all changed at the beginning of the year.

This has not been a good year and it's really brought out people's concerns. And what we're talking about here today is just a safe place to stick some of your retirement money where you don't have to worry about it. Right. And Hans does a great job if you get his book, The Complete Cardinal Guide to Planning Foreign Living and Retirement, and looking at the advantages and disadvantages of all these different kind of risks of investments, all that stuff's in his book, The Complete Cardinal Guide to Planning Foreign Living and Retirement.

It's all at cardinalguide.com, as well as links to his YouTube channel, which is spectacular, where he goes into all this as well at Cardinal Advisors on YouTube. Great show, Hans. Thank you.

Yeah. Well, thank you and God bless you. Finishing Well is a general discussion and education of the issues facing retirees. cardinalguide.com, Cardinal Advisors, and Hans Schleil CFP sell insurance.

This show does not offer investment products or investment advice. We hope you enjoyed Finishing Well brought to you by cardinalguide.com. Visit cardinalguide.com for free downloads of this show or previous shows on topics such as social security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Hans' best-selling book, The Complete Cardinal Guide to Planning Foreign and Living in Retirement, and the workbook. Once again, for dozens of free resources, past shows, or to get Hans' book, go to cardinalguide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Well radio show on the website and send us a word. Once again, that's cardinalguide.com, cardinalguide.com. This is the Truth Network.