The “Maturity Tsunami” – How MYGAs and FIAs Provide Solutions for Maturing CDs and Sideline Cash

Opening: In the coming year, nearly $2.5 trillion in CDs will reach maturity, creating what some are calling a “maturity tsunami.” As interest rates decline, this flood of maturing CDs presents both a challenge and an opportunity. With declining CD returns, clients risk losing purchasing power and facing reinvestment risk. The solution? Multi-Year Guaranteed Annuities (MYGAs) and Fixed Index Annuities (FIAs) offer secure, tax-deferred options that beat traditional CDs in return potential and tax efficiency.

1. The Problem: Reinvestment Risk and Inflation Eroding Purchasing Power

• Reinvestment Risk: Lower interest rates mean smaller returns when maturing CDs are reinvested. MYGAs and FIAs offer an alternative with typically higher returns and locked-in rates for more predictable growth.
• Cash vs. Inflation: Holding cash in a low-interest environment lets inflation erode purchasing power over time. MYGAs and FIAs provide an inflation-resistant option for protecting and growing assets.

2. MYGAs – Higher Returns and Tax-Deferred Growth (The “CD on Steroids”)

• What Makes MYGAs a Strong CD Alternative? MYGAs, often considered a “CD on steroids,” provide the locked-in rates clients appreciate, with the advantage of tax deferral and generally higher returns.
• The “Miracle of Triple Compounding”: Unlike CDs, MYGAs allow for tax-deferred growth, meaning clients benefit from interest on their principal, interest on their interest, and interest on taxes they would have paid annually on CD income.
• Flexible Terms to Match Needs: With a range of guarantee periods, typically between 3 and 8 years, MYGAs offer the flexibility clients need for structured, predictable growth.

3. FIAs – A Tax-Deferred Bond Replacement with Growth Potential

• Why FIAs Outshine Bonds: For clients looking to replace bonds, FIAs offer principal protection with returns linked to a market index (like the S&P 500), allowing for growth without exposure to market losses.
• A Higher Expected Return: FIAs deliver returns considerably outpacing bonds’ 3.8% return. This tax-deferred growth is ideal for clients seeking low-risk accumulation.
• Perfect for Pre-Retirees: FIAs protect assets from sequence-of-returns risk—a critical concern for clients nearing retirement who need stability without market exposure.

Final Thought: As the “maturity tsunami” of CDs approaches, MYGAs and FIAs offer a secure and efficient alternative to cash or bonds, enabling you to protect and grow assets with tax-deferred compounding. Ready to explore better options? Consider MYGAs and FIAs as next-level, inflation-resistant solutions for sideline cash.

For personalized information, reach out to Kathryn & Kurt at IUL.Solutions. If you find this information valuable, please subscribe and share with others who might benefit!