MYGA versus fixed indexed annuity: the one question that decides it

Rates are still high enough that a multi-year guaranteed annuity (MYGA) is a real product again, and clients are asking about it next to the fixed indexed annuity (FIA) they saw at a dinner seminar. One question sorts most cases: does the client need to know the number?

MYGA. A fixed rate for a fixed term, like a CD without the FDIC and with tax deferral. The client knows exactly what they'll have at the end. Surrender charges apply for the term. Best for money the client won't touch and wants to see grow on a schedule.

FIA. Credited interest tied to an index with a cap, a participation rate or a spread, and a zero floor. The upside is higher in good years; the downside is a flat year with no interest and the confusion of explaining a cap that moved. Best for a client who wants some growth potential and can accept zero in some years.

Income riders. This is where FIAs earn their keep. A guaranteed lifetime withdrawal benefit rider gives the client a known income at a future age regardless of index performance. MYGAs generally don't do this. If the client's goal is income at 70, the FIA with a rider is usually the discussion.

What to say about fees. MYGAs have no explicit fees; the spread is baked into the rate. FIA income riders carry an annual charge that reduces accumulation. Say the number.

Suitability. Age, liquidity needs, other assets, and time horizon go on the form. A 78-year-old putting 80 percent of liquid net worth into a 10-year FIA is going to get kicked back, and it should.

What MYGA rates are you seeing this quarter, and are your clients choosing them over FIAs?