If you have been talking to a financial advisor about yourself, your future, and any possible investments, you have probably been told how smart you’d be to invest in a MYGA. It’s not a household term but it should be because putting money into a MYGA could greatly enhance your financial standings and also help you plan for the future with tons of stability and not as much risk as other investments.
One of the most appealing things about Multi-Year Guaranteed Annuities, also known as MYGAs, is the safety that comes with them. What makes them so safe? Why are people impressed so enticed by them? And how can they help you secure a strong financial future?
Fixed Interest Rates: One of the key characteristics of MYGAs is the promise of a stable interest rate for a set period of time, usually ranging from 2 to 10 years or more. This is a huge benefit and, generally, not found in a ton of other investment opportunities either.
No Exposure: Unlike some other financial tools, MYGAs are not directly related to the larger stock market, and that is ultimately a very good thing. That’s because that makes them immune to market volatility, and their returns are unaffected by variations in stock or bond prices. So no matter if the market is going up or down, your investment stays safe and you can be sure you won’t lose all of the money you put into it.
Protection On Principle: Another thing that is great about MYGAs is that they normally guarantee the return of the principle amount invested, regardless of market circumstances or interest rate fluctuations. This feature provides a level of capital protection that may appeal to investors seeking a conservative and reliable investing choice. Once again, no matter what happens to the market, you’ll be able to hold onto your principle amount spent.
What Are The Risks?
There is a ton of good that comes with MYGAs, but there are also some possible downsides to them too. For example, the fixed interest rates offered by MYGAs are usually lower than the potential returns that you can get from riskier investments. Yes, you don’t get the risks but you also might miss out on big upsides.
MYGAs often include certain periods during which withdrawals may result in fines that you’ll have to pay. This lack of liquidity might be problematic if you need to access your funds before the surrender time expires. So, once you put it in, you’re going to have to leave it in for some time.
Additionally, fixed interest rates on MYGAs may not keep up with inflation over time. Therefore, while your investment is safe, the buying power of the rewards may be reduced by inflation. This is something that you need to keep in mind when you contemplate a future in MYGA investing.
