To learn more about this NEW FIA (Fixed Indexed Annuity) product, click on the following:
https://advisorshare.com/myga-and-cd-killer
If you have clients who keep their “safe money” in Certificates of Deposit(CDs), this newsletter is for you. If you use MYGAs (Multi-Year Guaranteed Annuities) with clients, you should also find this newsletter interesting.
Like it or not, many older clients like CDs and will use them because they offer guarantees. I personally don’t care for CDs because the yields are low and the gains are taxable every year.
MYGAs are a CD alternative
MYGAs usually offer higher guaranteed rates than CDs for similar periods of time.
MYGAs, however, have no upside growth potential if the market does well.
Guaranteed returns with upside potential!
How does this NEW FIA work?
1) This NEW FIA has a minimum guaranteed return over the life of the product.
For a 5-year product, the guaranteed compounded return is 3.51%
For the 7-year product, it’s 3.62%
2) The annual point-to-point cap on the S&P 500 cap = 9.25%
3) The “guaranteed” annual minimum S&P 500 cap = 7.75% (5-year product)
If the returns in the product at the end of the term are not as high as the guaranteed minimum, the client is credited with the guaranteed minimum return.
Let’s compare this NEW FIA to CDs and MYGAs:
Today’s rates:
5-year CD = 4%
5-year MYGA = 5.65%
5-year FIA CAGR (Compound Annual Growth Rate) the last 5 years ending Dec., 2025:
-9.25% cap = 7.13%
-8.5% cap = 6.54%
-7.75% cap = 6.15%
The last five years are very typical for the S&P 500; four positive years and one negative.
Total value of each asset at the end of 5 years when starting with $100,000:
-CD = $121,665 (I’m ignoring the fact that the gains are taxable every year)
-MYGA = $131,682
-NEW FIA with a 9.25% cap = $140,786
-NEW FIA with an 8.5% cap = $136,942
-NEW FIA with a 7.75% cap = $133,194
What do you immediately notice?
All the account values are higher with the NEW FIA at the end of the 5th year during a typical period in the stock market, with four positive years and one negative year.
What about from 2015-2019, which had two down years and three positive years?
-NEW FIA with a 9.25% cap = $128,848
-NEW FIA with an 8.5% cap = $126,221
-NEW FIA with a 7.75% cap = $123,642
The NEW FIA still did much better than the CD but slightly worse than a true five-year MYGA.
If the market goes on a tear with five positive years, then the numbers would really kill.
Commissions?
4% on the 5-year product.
5% on the 7-year product.
Summary
Next time you have a client who wants to use CDs for long-term safety, you now have an FIA that can nearly guarantee higher returns with no risk of loss.
As for using this NEW FIA over MYGAs, with typical market returns, the new product should also do better.
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