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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, bestselling 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. Welcome to Finishing Well, a certified financial planner on Scheil, and today's show may sound a bit complicated, but hopefully we're going to make it easy for you by the end of the show, because the whole idea we're talking about today is called a MIGA, which is multi-year guaranteed annuity. So you get M-Y-G-A, right?
Multi-year guaranteed annuity. And the reason we're talking about these is that, you know, due to a lot of things that have been happening in a lot of different markets, a lot of people have taken their money out of investments and they're leaving it sit there and, you know, which it's important we're going to talk about that you have some money, you know, that's sitting there, but a lot of money that's not doing anything would remind you of, of course, you know, the three men that were given the talents and the one guy that buried him in the ground. You know, he ended up with a whole mashing of tea thing. And so here in today's show, we want to talk a little bit like, you know, John Ortenberg's book years ago, if you want to walk on water, you got to get out of the boat, you know, that Peter was the only person that got to experience walking on water that was in the boat that night, because he took the chance and got out of the boat.
And you may think he failed, but actually he had the exhilarating experience of holding onto Jesus' hand and coming up out of the water. But also, Darryl Waltrip used to put it, and he was a pretty good race car driver, that if you're going to have a chance, you got to take a chance. And so it's kind of where that goes, is that if you have a whole ton of money sitting there doing nothing, Hans, that's not good. No, it's not. And unfortunately, many people in today's day and time that have money and have reserves and have savings are holding a good bit of it in cash.
And that's for a number of reasons. We have people with big balances in their checking account, their money market account, CDs, cash in their brokerage account, which might be where they got out of the market earlier or some of the market or in their IRA, where they've just got cash. And cash is just earning very, very low rates of interest because it's cash, it's available to you. So people in general, and I would just ask you to ask yourself, am I holding too much cash? And if you're not, then we're not proposing that you would go create cash by selling something to then put it in one of these MIGAs, the multi-year guaranteed annuity.
This is a great place for people to get substantial interest on their cash. So I want to just go over a little disclaimer before I get into explaining exactly what a multi-year guaranteed annuity is. So comments regarding safe and secure products and guaranteed income streams refer only to fixed insurance products. They do not refer in any way to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company and are not offered by Brookstone. So we do offer through Brookstone investment products, and we're not talking about those today. We're talking about the multi-year guaranteed annuities, and then we're going to give you some examples specifically of three different company offerings. And then you're going to be able to follow this up on YouTube if you want to get the show notes and all that kind of stuff or on our website at cardinalguide.com.
You can see all this stuff written out. So the first thing we want to talk about is with a multi-year guaranteed annuity is they are for a fixed period of years, and the most popular period that people buy these things, at least with us, is for a five-year period. So they're going to lock their money up for five years, and obviously, they don't put all their money in there, all their cash. But say that a person is used to having $20,000, $30,000, $40,000, $50,000 of cash or cash-ready money in case of an emergency, but they find themselves with $200,000 of cash.
Well, it's obviously not necessary to keep $200,000 laying around so you can get it in a moment's notice, so you may want to consider going into these one or some of these MIGAs with maybe $150,000. So it's almost like, as I'm listening and thinking about what you're talking about, I think most people know what a CD is, which was simply a certificate of deposit. But it's similar in its own way that it was on a multi-year kind of thing. Like you had two-year CDs, three-year CDs, five-year CDs, isn't that pretty much the same concept?
It's the same concept, but they're different, but it is very close, and those are still available. I mean, if you go to the bank and you look at the sign, or you go online, or you talk to most bankers, they have one-year CDs, two years, 18 months, five years. And typically, back in the days where people bought a lot of CDs, five years was very popular because that's long enough that you can get a pretty good rate, but it's short enough that you can foresee getting at your money. It's not 20 years.
So it just seems like that's the most popular, followed closely by the three years. And we are able to offer these to people where we set up a ladder that some of their money goes in two years, some of them in three years, and so on and so forth. And we'll do another video later about a ladder, but for the purposes of today, I really just want to explain the five-year MIGA and then some of the offshoots of it, or some of the three-year and the seven-year, but just want to explain this in a basic sense. Now, when you bring up CDs, one of the biggest differences for the bank CD in these insurance company annuities, MIGAs, is a bank CD has FDIC insurance. So they're backed up to like $250,000 a person, where if the bank went bad, that the FDIC would come in and guarantee the money. So that's definitely a plus for CDs, and with a multi-year guaranteed annuity, you don't have that FDIC protection. What you have is they're guaranteed by the claims-paying ability of the insurance company. And one of the examples we have in the YouTube video and we sell for is Nationwide, and Nationwide is paying a little less interest, but a lot of people are real comfortable with buying their MIGA, or their multi-year guaranteed annuity, from Nationwide because they're familiar with them. And they're paying on their $100,000 and more five-year MIGA 4.95% interest. So that's pretty spiffy, coming from a big insurance company like that.
But it's not as good as the federal government backing it up, but you've got Nationwide behind it, or with these other companies, they're pretty solid as well, or very solid. So make yourself clear? Yeah, I see that completely. You know, obviously, two obvious differences right now that I'm hearing is, you know, on a CD right now, you'd be lucky to get a half a percent, or even one percent, right? That's true. It's your local bank, and then you can get some of the internet banks, you can get them up to two.
Right? Compared to two and a half. Compared to 4.5, you know, that's a huge difference in the return, with the difference in the risk being you've got FDIC versus, you know, Nationwide, the insurance company, right? Well, and there's also some other differences, is that a CD, in order to get any of the money, you generally got to break it at the bank. You can't go in there two years into a five-year CD and say, hey, I need some of that money. And they're going to say, okay, well, you could break the CD, and then you got to pay a pretty hefty penalty, and then you can get some or all of the money. I think you got to get all the money. With these MIGAs, they all have different rules, but you can get it some of this money every year. And then you can use a small amount of your interest to actually buy liquidity, where that you could get it 10% of the value every year. So these actually have better liquidity, typically, than a CD at a bank. Okay.
And that is, you know, now we got three. Yeah. I mean, there's a lot of benefits to these. And the insurance companies don't really incur a lot of expense to do this, because, I mean, I get clients that ask me, and prospects coming in, and they say, you know, well, why are they able to pay so much more? And the reason is, is that, first of all, the insurance companies, my answer to that is these insurance companies know what they're doing.
I mean, that's the first thing. But what I will tell you is they have very little expense in issuing these things. They pay me something, or they pay my agency something, but they pay that, that's separate from the transaction. That's not paid, that's paid from them. So they write these things, and most people just leave the money there for the whole five years.
And then, you know, we're watching it, because we're the service people. And then when the five years comes up, or the three years, or whatever it is, we get with the people. And most of this money leaves that company at the end of the three years, or the end of the five years, some of it to just roll into another one of these things.
Okay? Right. Now, there's another advantage to these, and that you're not paying taxes currently on interest that you're not spending. So when you're earning this 5.2%, or 4.9, 5, or whatever on $100,000, you know, that's around five grand a year. And the five grand a year would normally show up on your tax return, even if it's stuck in the CD.
With these things, it doesn't work that way. Because they are annuities, it has tax deferral. You don't pay the taxes on the growth portion until you actually pull it out. And that doesn't mean that they have to be IRAs or anything associated with that. The tax deferred part's just the fact that it's annuity? Yeah.
Well, you can buy these with an IRA, and then everything in the IRA is either tax deferred or tax free, if they're Ross. Yeah, we've set a mouthful, and the good news is we got another whole half of the show to help you out. And again, if you've got questions, obviously, you know, from my standpoint, we got money sitting there. It'd be a good time to reach out and talk to Hans, and you can find out how to contact Hans and Tom at cardinalguide.com, the show's brought to you by cardinalguide.com. That's where you can find Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement. And so we'll be right back with a whole lot more on these multi-year guaranteed annuities.
We'll be right back. 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, and today's show is the idea of the MIGA, which is a multi-year guaranteed annuity. And you know, with the concept that if we got a lot of money sitting around and it's not getting any interest at all, I liked what you called that in the video, lazy money. That's just the stuff that's buried in the ground. You know, here's a really sound way to deal with it, right? Well, yeah, lazy money is money that's just sitting in the bank.
It's not earning much. It is liquid and available to you. So like, you could put it to work anytime. It's like, it's like your nephew sitting in there, he's in there watching TV and he's being lazy, but he is saying, I'm ready anytime.
You want to give me a job, I'll get up, but I'm being lazy. And so that's, that's what we're really talking about is one source, and there's many sources. And so what I really wanted to do in the second part of the show is just talk a little bit about in the video, we put three different company offerings. One is from Fidelity and Guarantee, F&G insurance company. The second one is from Aspita and the third one is from Nationwide.
So like the Nationwide is on your side company, which is, most people are more familiar with the third one I talked about and not so much with the first two, but they're all three highly rated. And, you know, so if we start with F&G, F&G is paying on their five-year multi-year guaranteed annuity or MIGA 5.2%, I mean, get that, that's sweet. I mean, that's one of the positive benefits of the federal reserve raising interest rates. So that's the five-year and on the three-year it's 4.5%. And on the seven-year it's 5.4%. And that's why a lot of people don't really go seven because you're doing two extra years and you're only getting what is 20 basis points or 0.20 more.
So the five-year is the most popular. The three-year is something that people that really foresee that they're going to want this money back in, you know, a shorter term and you're not really giving up that much. So and I want to point out that these rates that I'm quoting are effective October 24, 2022, and they're subject to change at any time.
And if you wanted to find out more about these, you could certainly give me a call and you could watch our videos, go to our website and see the show notes from today's video. And there's various other disclaimers, but these could change at any time. So the next company that I put up is Aspita, and they run their offices out of Durham, North Carolina.
They're A-rated by Best, by AM Best. And they're paying the exact same rate on the five-year as 5.2% for each of the five-years as guaranteed. And then on their three-year, they're paying a little bit more, it's 4.85%. And they also offer a two-year at 4.1%. So if people had even shorter term where they wanted to get at the money in a couple of years, that 4.1% is very attractive in the rate for the two-year. And then the seven-year is 5.35%. So and the same thing with the F and Gs is these rates could change at any time.
And the nationwide, they're not offering quite as much. And I'm just going to go over the five-year. But on the 100,000 and more on the five-year nationwide, like nationwide is on your side, it's 4.95%. And these are their rates as of 10-1-2022. And they're in effect now when we're making the show, but they could change at any time.
So you would need to give me a call or get in touch with Tom or me and we'll, we could certainly talk to you about these things. Right, interestingly, nationwide, as I'm looking at the chart that you gave me, you know, their three-year deal on whatever isn't seemed bad at all. Right? Well, it's sweet. But you're not really understanding that, correct, because it's not really a three-year deal. It, you know, that's why in the video, we just only went over the five-year thing. So because it's really a five-year thing and it's the interest rate is just guaranteed for the first three years. So they have a way of making this a little bit more confusing than it needs to be. Okay.
All right. Well, that's why it's helpful to know the guy, right? That it can, you know, it can help you go back and go, well, that, you know, if, if you can get that for three years, like why would anybody, you know, let out their money any longer than that? But now that I understand that there's, you know, it helps to have somebody that knows what they're actually doing with a guaranteed annuity. So to back up a little bit, you had said something that a paid out annuity versus this, what, can you kind of go back to that, you know, because I'd never heard of that idea and what does that mean?
Sure. So all annuities are designed to pay you an income either starting right from the beginning and that's an immediate annuity or they're deferred annuities and that means that the income starts later. So these MIGAs, the income is never really going to start unless you really want to play it out for that.
But I mean, you would have an option of income right within side of these, but let's just put that aside. These are really designed to just put the money there, leave it there for five years and then take the money out at the end or roll it over into something else. So these are deferred annuities and what we do with most clients that buy one of these is they're going to do a five year deal. So they're just saying for right now I'm going to lock the money up for five years, I want to get this interest rate, I want to let it compound, I'm not going to pay taxes on it and then five years from now I'm going to have a pretty substantial interest built up in there.
Okay. And then I have the option of just taking the money and using it for something and then I'll have to pay taxes on it. But I also have the option of rolling it over. Just to do the math on that, if I'm following you, if you put $100,000, wish I had it, but if you took $100,000 and you put it in this five year MIGA and let's say it got 5%, right? Like you said, you would get $5,000 a year and so even without compounding it, you got $25,000 at the end of that five years that you actually made an income on it, right?
Right. And you would actually have more than that because of compounding, but yeah, so you'd have a pretty sizable balance there and that's money that you haven't paid taxes on. You will pay taxes at some point and if you don't want to pay the taxes in five years, the simple way to do it is you just roll into a new five year, which is probably with a new company because you want to go out into the market through us and just see which company is given the best deal, you know, in 2027, somebody's going to have a better deal than the company you originally had it with.
So that's one option is just, well, actually I've gone over two options. One option is take the money. The second option would be to roll it over into a new MIGA, a new multi-year guaranteed annuity for however long and the third option would be to roll it over into an income annuity and that of course would be based upon your needs. So if five years from now, you know, five years from now you look at your health and you say, well, I don't want a life income annuity because if I'm in bad health, why do I want to buy something or take something that's going to pay the rest of my life if I have an idea that my life might be short so that we'd rule out the life income annuity. But if somebody was in great health in five years, you might take a look at that. We'd put that $125,000 or whatever the amount is into, we'd roll it over there into an immediate annuity and that would pay them a check every month for the rest of their life no matter how long they live and then some portion of that would be tax-free because it's just sending your $100,000 back and the other portion would be your interest that you've accumulated plus the interest they pay you on the deal. So you could just spread that tax-deferred interest out over a whole number of years.
So that would be an option for the healthy person. For a person who is thinking that they might not have a lifelong life expectancy but they still like the idea of getting a check for so many years, there's a fixed period annuity that we offer with several companies. And then you could pick like 10 years, five years, seven years, I mean we just pick a number and then you get a check every month for that many years and the check is comprised of return of principal and interest and then that'll show up on your tax return, whatever the interest that you receive over those 12 months. So there's all kinds of options at the end of the five years.
The beauty of these things is we're only locking your money up for the stated period. But to go back to the five years, for a minute to the paid-out annuity, the first one you talked about that didn't have a fixed term to it, it's kind of like Social Security. If you live to be 120, you're going to be getting money that you didn't put in, right? It's because that's the way annuities work, is they just keep paying and paying and paying because that was the deal.
It's absolutely right. It's very much like Social Security. You don't know how long you're going to live.
Only God knows that. If you live a long life, you're going to be way ahead of the insurance company. We also on those, we typically offer a 10-year period certain on those life annuities. Even the guy that thinks they're going to live to 120 or 100 or 95, if they were to pass away in the first five years or three years or something unexpectedly, well, then they would know that if they had a 10-year period certain that their beneficiaries would still get those lifetime checks for a total of 10 years.
Does that make sense? Yeah, which is, again, getting back to the whole idea that the end game of an annuity is like Social Security. It just keeps paying and paying and paying. If you keep living, you don't have to worry about outliving your money, which is just a beautiful thing.
That's the whole reason you get the tax break where you get the tax deferral. Right. And unfortunately, as always, we've run out of time before we ran out of show. So we're going to do more on MIGAs. You can see all that coming and now you know what a MIGA is, multi-year guaranteed annuity.
How fun is that? Again, you can find out more about that at cardinalguide.com and order Hans' book, The Complete Cardinal Guide to Planning, Forward, Living, and Retirement. But by all means, I'm sure like me, you're thinking, before I do something like this, I ought to talk to Hans.
So you do that, just go to cardinalguide.com and get in touch with him so that you can get out of the boat, right? If you're going to walk on water, in order to have a chance, you've got to take a chance. So here you go. So, well, thank you for listening. Thank you, Hans. Great show.
Thank you. The opinions expressed by Hans Scheil and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such.
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Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. 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' bestselling book, The Complete Cardinal Guide to Planning for 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.
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