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When a MYGA Ladder Meets a Bond Ladder · How to Retire on Time

• 0:00
  Mike: Hi. Mike Decker, author of the book How to Retire on Time. Here's a question I was recently asked on my Retire on Time q and a. Check it out. Steve says, Why aren't MYGA ladders pushed more strongly compared to bond ladders?
• 0:17
  Because a lot people have no idea what MYGAs are.
• 0:21
  David: Yeah. So it's an insurance product, right, from an insurance company.
• 0:23
  Mike: Yeah. Also, MYGAs don't pay much of a commission, like at all.
• 0:27
  David: Oh, and so therefore...
• 0:29
  Mike: Why would anyone push them? It's just a hassle of paperwork and you don't really get paid on them.
• 0:34
  David: So, that's sort of pulling the curtain back. A little peek under the covers here. Yeah. You may not have been... Yeah, it hasn't been brought forward because there's no incentive for someone to Yeah.
• 0:43
  Mike: Like a a CD today, and these are just round numbers, might pay like 4% for two years. A three year MYGA might pay 6% each year.
• 0:50
  David: Mhmm. So that's good for the person that... Yeah.
• 0:53
  Mike: You can't get it on your own, and any insurance salesperson salesperson isn't isn't gonna gonna wanna sell you a MYGA that pays like nothing in commissions. They're gonna try and convince you to buy a ten year indexed annuity
• 1:01
  David: Yeah.
• 1:02
  Mike: Or something and lock your up... Your assets longer. But what if you only need the MYGA for two, three years, and then you wanna have... So... Yeah.
• 1:09
  I mean, this is why I love doing these Q and As, because we can get anything asked. Yes. But here's... Let me just... Let me try and distill all of this down.
• 1:24
  Every investment or product has a series of benefits and detriments. You need to define first the mission, run your plan, Explore the strategies, and then understand the risks when you're exploring the strategies so that you can then get the right tools in the toolbox. Because for every investment or product you're thinking, there's another one that might do a similar job a little bit differently, and this is understanding which one's more appropriate for that specific mission.
• 2:00
  David: Mhmm. So I have a million dollar portfolio. I might have this chunk of million dollars. That's your mission. It's for my my near term cash needs for income.
• 2:11
  And then... But this section is for a long term. I don't need it for decades. Yeah. Yeah.
• 2:16
  So you you you assign the the money a mission, and then you're...
• 2:21
  Mike: Yeah. I like... Steve says, I got you to say the quiet part on my guys. It's not the quiet part. I say these things out loud.
• 2:28
  I don't care. Here's... I wanna I wanna just mention something here real quick. This is important. So, short term duration or timelines of what you need, so five years or less, fixed growth is actually probably, the odds are probably better than anything else.
• 2:47
  David: At least right now in this current environment.
• 2:49
  Mike: Yeah. Like, look, if you have if you have an a buffered ETF, 7% growth, people think, oh, I'm gonna get like 7% every year because the markets keep going up. What if they don't? See, if you if you average out like fees and and all these other things that factor into here, you might get like 4.8%, historically speaking, of actual average annual returns on the cap as in... 7% cap on the S and
• 3:14
  David: P. Mhmm.
• 3:15
  Mike: Because you have to factor in those zeros. Well, 4.83% sucks when you compare it to a six percent guaranteed growth over the next three years, let's say, or whatever it is. Yeah. Yeah. There's credit risk, so, you know, it it makes sure it's with a good company.
• 3:29
  If you need to spend money within the next five years, I'd take the fixed growth.
• 3:35
  David: Mhmm.
• 3:36
  Mike: You can't get MYGAs on your own, like you have to go through an agent like us. So we're... So I mean, we we do securities and investment and financial planning. We're licensed with insurance like you do Medicare. I I...
• 3:46
  We all do the the annuities. We all do the MYGAs. We all do the life insurance if you want that. We all do the health cares. And then we also file people's taxes.
• 3:53
  Like we're one of the few shops that just don't mind what tool you pick. We have access to all of it. But my goodness. Yeah. Six percent guaranteed growth for a three year MYGA over maybe making 7%, but probably making around 5%.
• 4:07
  You get one zero in there. Oh. It's a problem.
• 4:12
  David: Yeah. And and what is the zero in there that you're talking about?
• 4:14
  Mike: Yeah. The markets don't go up, so you don't make any money.
• 4:16
  David: Oh, yes. So that... During that one little period of time where the where the market's bad, then you don't lose anything, but you're also not gaining
• 4:25
  Mike: Yeah.
• 4:25
  David: With a buffered ETF.
• 4:26
  Mike: Well, you got the expense ratio. And So I guess you could lose, like, point 85%
• 4:31
  David: Oh, I see. I see.
• 4:31
  Mike: Yes. Or something. Alright. So, you know, I... There we go.
• 4:37
  We're saying the parts that people don't wanna admit out loud, I guess. That's all the time we've got for today's show. If you enjoyed the show, thanks for tuning the podcast. Don't forget to subscribe, leave a rating, and as always, tell your friends, the larger the subscribers are, the better the content can be that fuels your preparation for retirement. We'll see you in the next show.