6-Year MYGA Ladder - YouTube

Today's Lesson, we're talking about, really  ladders, or in this case a MYGA Ladder.  

A Multi-Year Guaranteed Annuity Ladder. And  I've offered these to clients for years,  

where they were really bond ladders.  And the whole concept of the ladder is,  

you got money coming due every year. It's reaching  the end of it’s term, or you have liquidity to  

your money. So tell you why we're talking about  this, is I have this client that is a new client  

to us- he's down in Alabama. He's a single  man and he is very fiscally responsible. He  

he didn't have any debt whatsoever, not  on his home, not on his car, he's got  

about $300,000 dollars in his 401K at work-  maybe a little touch more than that. He is  

getting ready to retire, his Social Security is..  he's getting ready to enact that when he retires,  

maybe. Until he met me. We may delay  it a little bit, but in any case  

this guy's really in good shape financially.  And then as we start going through things,  

he does, he just lives within his means. We  start going through, I find out about this  

cash that he's got spread around a few banks,  and he starts telling me about it in pieces.  

And you know- it's $30,000 here and then  $50,000 here- and we start adding it all up,  

this guy has $165,000 of cash that is sitting at  kind of bank rates. I..I called my credit union  

this morning, or I actually looked online just to  see what they're paying me on my Checking Account  

balance, on my Money Market account balance- and  then I don't have any CDs- but if I did, these are  

the kind of rates that they're paying. And he was  getting something similar to this. And I figured  

out, I have $10,000 in my Checking Account and  I started to figure out .05% Interest on $10,000  

works out to be something like $5. I mean it's  just, it's like nothing, and the Money Market  

I've got more money in that. And you know this  is me not being that fiscally responsible, but  

I've got the money sitting there just because I  need to spend it on some things that are upcoming.  

That we're doing personally, but this guy has  $165,000 of just ready cash, and he didn't get  

there overnight. He got there just by saving  money and saving money, and I think in the past  

some of this money was in CDs, but maybe just like  a number of you, it's like what's the point. Where  

with me, what's the point of messing with the  Money Market when you get .15% instead of 0.05%.  

So what i'm leading up to is, as I find a lot of  clients coming in and hiring us for the service,  

they've got over a $100,000 of  cash. It's just built up, or  

$78,000 of cash or $190. And then when we start  adding it up and we look inside of their IRA,  

some of the people inside of their IRAs or their  401Ks, they have a substantial amount of cash.  

Because they've gone safe- when they when the  markets have done what they've done or we had  

this scare back in March of 2020 and people  made movements out of that, they're just  

perhaps getting ready to retire, they're they're  sitting on a lot of cash, and when you really-  

it's painful to look at it- they're getting rates  like this. So now back to the guy, gentleman from  

Alabama. We're sitting down and he, he was, he  was kind of ashamed to this as he brought it out,  

and I didn't even ask him the rates because he  already knew. And so he's talking to me, ‘Well  

what, what should you do about that?’ And I'm  very careful on initial interviews, that I don't  

give out a lot of advice because I don't know  them well enough. I haven't had a chance to think  

about it, but the first thing that goes through my  head is really our most popular thing that we're  

selling to people with cash, is this five-year  Multi-Year Guaranteed Annuity that's paying 3.15%.  

And so, you know if you bought one of  those right now, this is November, 2021,  

you're tying the money up just like a five year  CD, until 2026 for five years. And you're gonna  

get paid 3.15% and I don't think he wants to take  any of this money and tie it up for five years. I  

mean he just doesn't. He wants it more available  to him than that, just in case he needs it.  

But as I talked with him I said, well you know it  just seems to me like we're going to do one thing  

with $65,000 of your $165,000. And  then we're going to find another place  

for the $100,000 because I.. I'm thinking that he  just isn't gonna next week need all of that. He  

didn't accumulate it over 10 or 20 or 30 years  to all of a sudden needed all in one month,  

so this really wouldn't be a good option for him.  Now this is our biggest seller for people that  

have large amounts of cash, maybe it's money  that five years ago would have gone into CDs,  

when they were paying 3-4-5%. But it's like people  have reached what the point-what's the point.  

And so we have people that have bought this plan  with $300- $400- $500,000 of cash that they had.  

Whether it's in an IRA or not in an IRA, or  they had to split it up and buy two plans.  

These MYGAs, or the Multi-Year Guaranteed Annuity,  we've got these from several companies. This is  

a real simple product to get your money in,  and it's similar to the bank where you're,  

just it's a term thing, it's like a CD. The  difference with the bank is this is not FDIC  

insured, so you need to note that, but it's backed  up by.. a you know.. $1 Billion insurance company  

or a multi-billion dollar insurance company. And  you've got the State Guarantee Associations coming  

into the picture there as well. So this is just  term money, there's no fees on any of this stuff,  

you just put the money with the insurance  company, they invest it. It's like mattress money,  

it's just like back in a drawer somewhere, and  then if you did buy that for $20,000 you're gonna  

have $23,354.This is the interest accumulated over  five years, it's just that simple. Now what I'm  

doing for this gentleman is, I wanted to create  this with some liquidity, so I created a ladder.  

And there are one, two, three,  four, five different products here.  

Actually, with five different products with four  different insurance companies. So we've spread it  

around, we do this stuff with different companies,  because different companies have the best rate  

at the different terms. And so they're an average  of four years. So we've got a six year in there,  

we've got a two years, so it's an average of four  years. These are the interest rates that you're  

going to get on the two year, the three year, the  four year, and so on and the average interest rate  

of for the whole six years is going to  be 2.684%. That isn't going to change,  

I mean that's just whatever the interest rate  stated, he goes with this thing this is what  

he's getting in all these different amounts. But  the important thing about creating a ladder is,  

starting in two years, every year, he's gonna  have $20,000 available to him. In November  

of 2023 and then same thing in 2024- he's going  to have another $20,000. So every year $20,000  

is going to become available to him. That if he  wanted to spend it on something, if he wants to  

reinvest it, maybe he wants to move some or all of  that into stocks or into the market- I think it's  

highly unlikely with this gentleman. But with some  people this works out when the money's coming due-  

to just be buying into the market at pieces  for these people that maybe got out of the  

market a year and a half ago or five years ago,  or they've got a lot of cash- even inside an IRA.  

Well then they're earning almost nothing on the  cash. We could set up one of these with the plan  

that maybe they're going to get back in at $20,000  a year. There's all kinds of uses of these things,  

but for this gentleman he's just going to  know that he's going to put his $100,000  

in there. He's kind of not going to touch  any of it for two years, but in two years  

there's going to be $20,000 come due. And then  his interest- which he hasn't paid tax on-  

is $869. Now if he draws it out, he's going to  have to pay taxes on the $869. He draws it out  

and spends it, or draws it out, and reinvests it.  But what a lot of people do with these ladders is,  

in November 2023, now he's going to purchase a new  five-year one, so he's going to get a higher rate  

and it's going to come due in November 2028.  So with this thing, you can renew the money  

and just keep rolling it forward knowing  you've got $20,000 that comes due every year.  

And the reason you're doing this is you're going  to get a much higher interest rate than you are  

sticking the money or leaving the money in the  bank. I mean it's just kind of that simple,  

and what we've got over here to the right is we're  showing the amount of accumulated interest that he  

is going to get on this thing. Which  is really over six years, is $11,941,  

and what I'm going to do for him, is we're  going to take, of that other $65,000- because  

he doesn't even really need $65,000 readily  available. We're going to take another $20,000  

and we're just going to stick it here, and we're  going to stick it, he's going to stick it in a  

separate account at the bank, where he's figuring  it right into these. He's going to get almost  

nothing on it, but he's getting almost nothing  on it now. So we're going to show him that every  

year, for six years, he's got $20,000 available to  him. So I'm just, it gives him a sense of peace,  

that, and it's not just six years. If he  keeps reinvesting it and rolling it over  

it's like he's got this long-term investment that  he's really not touching, but he just knows that  

every November he's got $20,000 coming to him. We  also can do this with any amount of money. I mean  

if somebody's got $300,000 and they want to make  these $60,000’s. We can't really do it with less,  

because the smallest they'll sell these MYGAs  is down to $20,000, but we could do a three-year  

ladder or something. So we can, we can figure  something out for you, the whole idea is using an  

insurance company which has much lower costs.  There's no fees on this, we don't charge fees,  

because it's insurance. Now I did  want to talk before we sign off here  

about where this money's coming from. I mean  one of them is like the gentleman in Alabama,  

is accumulated savings, okay. Is he just had this  Savings Account and it's just grown up where it's,  

it's not a good thing to have over $100,000  sitting in the bank earning next to nothing.  

We also are using these where some of the bond  allocations in people's portfolios. So, if people  

have a group of stocks and maybe they're too risky  in their portfolio- and so they're wanting as they  

get into retirement to be more conservative, but  they don't like bonds, because bonds are paying  

such low interest rates, and you've got risks  with bonds, is that if interest rates turn in the  

other direction you're going to lose principle. So  people just generally have gotten a little soured  

on bonds when they're 2%, or that type of thing.  So for the bond allocation we can use something  

like this as a plug, and we've done this for  a lot of people. Where we get some portion  

of their money stuck in one of these MYGAs:  safe with a fixed rate of interest. And that  

allows us to be a little more aggressive with the  rest of their portfolio, knowing that we've got  

some stuff pretty well locked in. And then another  place is market profits, we have a lot of people  

who have done quite well over the last 10-12  years in the Bull Market. And they've accumulated,  

they're nearing retirement, and they're just  fearful now of losing the money that they've got.  

And then, no, they don't necessarily want to  tie up what they're still looking at as low  

interest rates for five years. So one of these  bond ladders, or it's actually a MYGA ladder  

is quite effective, because it shows that there's  money coming due. So if they want to get back into  

the market, where they've taken some profits, it's  going to be a perfect way to time back in where  

you're spreading out your liability with that.  So I'm Hans Scheil and I thank you for listening.