A compelling investment today – and one that is risk-free – is a fixed annuity, a competitor of staid certificates of deposit (CDs).
Rates on select fixed annuities – specifically, Multi-Year Guaranteed Annuities (MYGAs) such as offerings from Atlantic Coast Life Safe Haven – are paying their highest rates in decades after adjustment for low inflation. These are so-called “real rates” and they are the best indicator of the attractiveness of an income investment.
“People who buy MYGAs are looking for a guaranteed interest rate with no bells or whistles and no fees”, says a financial adviser familiar with the product. “And this MYGA’s payout rate is the best available. So, this is a great product for someone buying their first annuity.”
Inflation has been running less than 2% annually. Atlantic Coast MYGAs pay just under 4% annually compounded, or slightly above. To the casual observer, this may not seem like all that much, but it is when you take into account that rates are only high when inflation is high, leaving investors with a negligible return.
The rates paid by Atlantic Coast Life and other highly competitive MYGAs have not changed that much. But what counts is that they have not declined. What is new are perceptions about inflation. After years of underperforming, the Federal Reserve Board’s goal of letting inflation rise about 2% annually, the thinking, increasingly, is that this just isn’t going to happen in the foreseeable future.
The bottom line is this: Interest rates that have been pretty good are now very good, and are more and more likely to stay this way for some time. So assuming that they will not be trimmed by insurance companies, Atlantic Coast Life MYGAs and others paying highly competitive rates today are extremely attractive.
Specifically, Atlantic Coast Life is paying 3.8% a year on five-year MYGAs, 3.95% on six-year MYGAs and 4.05% on seven-year MYGAs. By comparison, most CDs offered online are paying 3% or less on five-year paper and those available at bank branches substantially less than this. (Other MYGAs today are generally paying 3.25% to 3.85% on five, six and seven-year MYGAs.)
Atlantic Coast Life, rated a healthy B++ by A.M. Best, also pays a first-year bonus of an additional one percentage point. There is also one notable negative for some potential buyers: Unlike other MYGAs, Atlantic Coast Life bond offers no penalty-free withdrawals.
Potential buyers need to be aware that this MYGA, like others, has a surrender schedule, starting at a steep 9% in the first year. So, they need to be very confident that they will not need to withdraw funds prematurely.
The minimum investment for Atlantic Coast Life MYGAs is $5,000.
If you are interested in this product, please call 1-866-223-2121 or complete the form below.
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