Multi-year guaranteed rate annuities are often compared to CDs, and when looking at them as an overall strategy for your retirement plan, it’s worth understanding what they are and how they can be beneficial.

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Working with a CFP® professional can be an important step toward reaching your financial goals. Not only do these advisors meet rigorous education and experience requirements, but they are also held to some of the highest ethical and professional standards in the industry.

Education
CFP® professionals must master nearly 100 integrated financial planning topics, including:

– Investment planning
– Tax planning
– Retirement planning
– Estate planning
– Insurance planning
– Financial management

In addition to completing a comprehensive financial planning curriculum approved by the CFP Board, or equivalent academic coursework, CFP® professionals are required to complete continuing education coursework, including a CFP Board approved code of ethics course, to ensure their competence in financial planning.

Examination
CFP® candidates must pass a comprehensive 6-hour CFP® Certification Examination that tests their ability to apply financial planning knowledge in an integrated format. The exam is notoriously difficult and only 64% of people who took the exam in 2017 passed. Based on regular research of what planners do, the exam covers:

Establishing and defining the Client-Planner relationship
Gathering information necessary to fulfill the engagement
Analyzing and evaluating the client’s current financial status
Developing recommendations
Communicating recommendations
Implementing recommendations
Monitoring the recommendations
Practicing within professional and regulatory standards

Experience
CFP® professionals must have a minimum of three years experience in the personal financial planning process prior to earning the right to use the CFP® certification marks. As a result, CFP® practitioners possess financial counseling skills in addition to financial planning knowledge.

Ethics
As a final step to certification, CFP® practitioners agree to abide by a strict code of professional conduct, known as CFP Board’s Code of Ethics and Professional Responsibility, that sets forth their ethical responsibilities to the public, clients and employers. CFP Board also performs a background check during this process, and each individual must disclose any investigations or legal proceedings related to their professional or business conduct.

This video discusses fixed income investing and utilizes the 10 year U.S. treasury as a general representative fixed income investment. Conclusions reached, opinions stated, and downside risks and potential returns presented should not be construed as applying to other types of bonds or fixed income assets. Other types of fixed income products carry different levels of risk and return potential and should be evaluated as an element of a diversified portfolio with your specific risk tolerance, investment objectives, and timeline in mind. Nothing in this video is investment advice, an investment recommendation, or an offer to buy or sell any security. Investing involves risk.

Do you need a retirement plan beyond allocating funds to truly fit your needs? We can help you create a retirement life plan customized for your retirement vision and legacy. Call us at (877) 404-0177 or fill out this form for a free consultation: …(read more)

LEARN MORE ABOUT: Retirement Annuities

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When planning for retirement, one important consideration is how to ensure a steady income stream during your golden years. Two popular options to achieve this goal are Multi-Year Guaranteed Rate Annuities (MYGAs) and Certificates of Deposit (CDs). Both of these financial products offer a fixed interest rate and are backed by reputable institutions, making them relatively safe investment options. However, there are some crucial differences between the two that could influence your decision on which to choose for your retirement plan.

MYGAs are insurance contracts offered by insurance companies, while CDs are offered by banks. MYGAs provide a guaranteed interest rate for a predetermined period, usually ranging from three to ten years. Conversely, CDs typically have shorter terms, often between six months to five years, but can also be as long as ten years. Regardless of the term, MYGAs and CDs offer fixed interest rates, which means that you can expect a steady income over the duration of the contract.

One advantage of MYGAs over CDs is that they often offer higher interest rates. Insurance companies typically have more flexibility in their investment strategies, allowing them to offer more competitive rates compared to banks. However, it’s important to note that the interest rates on MYGAs, just like CDs, are influenced by prevailing market conditions. Therefore, it’s crucial to choose a reputable insurance company or bank that provides the best rates for your needs.

Another important factor to consider is the liquidity of your investment. CDs often offer more flexibility in this regard, as they often allow you to withdraw your funds before the term ends if necessary. However, early withdrawal from CDs typically comes with a penalty, which can eat into your earnings. On the other hand, MYGAs generally have more rigid withdrawal provisions. While some MYGAs may allow limited access to funds, others may not permit any withdrawals until the contract matures. Therefore, it’s essential to carefully consider your financial situation and determine which product aligns better with your liquidity needs.

Additionally, MYGAs and CDs have differing tax implications. The interest earned on CDs is usually subject to income tax in the year it is earned, and you will receive a Form 1099-INT for tax reporting purposes. MYGAs, however, are typically tax-deferred, meaning you won’t pay taxes on the interest until you withdraw the funds. This feature can be advantageous if you’re looking to minimize your current tax burden and secure additional income for retirement.

Considering all these factors, it’s crucial to evaluate your own personal circumstances when deciding between a MYGA and a CD for your retirement plan. If you value a potentially higher interest rate, a fixed income stream for a longer period, and tax deferral benefits, a MYGA might be the better choice. If, however, flexibility and accessibility of funds are more important to you, a CD might be the safer option.

In conclusion, MYGAs and CDs are both viable choices for your retirement plan, offering fixed interest rates and stability. Understanding the differences in interest rates, liquidity, and tax implications can help you make an informed decision that aligns with your financial goals and needs. It’s always advisable to consult with a financial advisor to evaluate your options and build a diversified retirement portfolio tailored to your individual circumstances.