Why I Don't Chase MYGA Rates

[00:00:00] Hello and welcome everybody to the Annuity Straight Talk podcast, episode number 188. I'm your host, Brian Anderson, founder and creator of AnnuityStraightTalk.com Best information about annuities and retirement planning on the Internet. If I don't say so myself, please like subscribe or comment on any of your favorite podcast platforms or on YouTube. Top right corner of any page on annuitiestraighttalk.com if you want to make an appointment and talk about your personal situation or I don't know, tell me I'm wrong or you got a bone to pick with me, you can do that too. Challenges make me stronger. I'm not afraid of them. So going to share my screen visual aid. [00:00:34] Interesting podcast this week or topic? Just something everybody needs to keep in mind. [00:00:41] I don't chase myga rates. What do you think about that? [00:00:45] And let me explain, I was thinking about this and as I write these things it's always I get the idea and I know how it's about how it's going to go and then something's got to tip me and give me the motivation to like sit down and do it. [00:00:57] That was absolutely perfect timing talking to a guy shopping for his 81 year old mother in law and wanted a Myga as part of some of her assets. [00:01:07] And there's so many different features of the products that make them more suitable for certain situations. [00:01:14] And I of course didn't show him the highest rate. I showed him the best variety of benefits within one contract renewal provisions, interest rates, super solid company free withdrawals, all that stuff. And he's like, well that's not as high as what I've seen. I'm going to go elsewhere, I will decline this. And it's like, okay, fine. So wanted to chase the rate and what he's thinking and on our first meeting, first time we talked, you know, he was new to learning about all the annuities and I hope he's not disregarding some of this other stuff. It's his business, his, his money or his mom's money. So no big deal. But it was just perfect timing to see it. It's like, well, he's going for rate. I don't know what other considerations he's worried about. And I think it's like some people like, do you think I don't see those options. I know what's out there, I know what's available. [00:02:01] If you wonder, well, why didn't you show me something higher and something I talk to people about? I'm not going to go with the highest rate. I'm going to go with the most overall benefits. So that's what I do. I have reasons for recommending what I do. Companies I've worked with, super solid financials, all that stuff. So the multi year guaranteed fixed annuities have become a lot more popular in the past few years. [00:02:24] And one of the things comes along with that is there's a lot more companies that are hoping to attract your retirement money and you got to pay close attention to all the details so you're not stuck with terms that don't work in the future. It may not just be about rates. So a couple years ago there was a podcast, probably sometime in 2023, how to choose the best Myga and I talk about all the fine print that would be important. The other little things you need to worry about instead of just the rate. And I don't need to go over all of that again. But essentially states why the interest rate is not always the most important feature. [00:02:57] Because something else might be a deal breaker for you. A lot of things have changed with annuities in the past few years, but the fundamentals stay the same. And I stick to fundamentals. One of the biggest changes is the number of different companies that are trying to be competitive for your business. It's not that they didn't have annuities, but they're jumping in and being aggressive in certain areas of the business. Meanwhile, the strongest insurance companies are doing what they've always done. [00:03:19] Inquisitive people might wonder why the smaller companies, maybe lower rated companies, are offering higher rates. And those who are new to this might not know to ask the question. So I'm here to tell you why I think it is. So business this year for me has been a little bit slow. It's kind of a relief because we were so busy the past couple of years. [00:03:38] I don't really mind. It's still good and I think about that why that's the case. But I've been able to enjoy life a little bit more. Everything's a little bit slower pace. I'm not putting in 14 hour days which was wearing on me for a while. [00:03:50] And I get to spend more time servicing existing clients, have better conversations. I'm not in a hurry all those things with products just as good as they have been for the past couple years. I'm also surprised to know that some of the other people in the industry have also noticed that things slowing down. It started around approaching the election last year, a lot of uncertainty. There's Inflation, you know, interest rates, all that stuff, tariffs, taxes, people are distracted. Now this not might not be true for some people. Like there's still some really aggressive salesmen who are very active, staying busy, closing a lot of deals. I'm just not that aggressive, you guys know that. [00:04:25] But I think one thing that's important is the, the rate increases that started about three years ago were such a dramatic change that a lot of people were on the sidelines, decided to get off and lock into an annuity. Now what I consider we're kind of returning to normal times a little bit. [00:04:40] But there's something else I realized recently that might suggest another reason why my phone isn't ringing quite as much. [00:04:46] Consumers are not the only ones jumping to a chance to capitalize on annuities. So we've talked about private equity jumping into the insurance industry over the past decade or so become very obvious in the past few years. One thing in particular that has happened, several smaller companies have been purchased, then renamed and given new financial backing from a major equity. And it all may sound solid to some, but that big equity firm is not really on the hook for the guarantees of the company and in a lot of cases trying to access easy money from the insurance industry and it starts to run outside the normal parameters of what has traditionally been the safest place to put money. Now, as long as markets are good, robust, they can take more risks in some places and it might work out, but you want to be careful what happens down the road. [00:05:33] I will always continue to keep recommending people put money in the safest place. With this in mind, I am not going to chase the new fads in the industry. [00:05:43] So a couple weeks ago, searching migrates and I can go into a database and you guys can find these everywhere and it'll tell you the top rate for each surrender term period. You know, two, two through 10 years, maybe one year, all that stuff, one year you should just do a CD because it's a lot of paperwork for just one year. But like the top, the companies that were at top for each term period were. There's only one that I'd ever heard of before that's definitely private equity backed. And the rest of them, they were nowhere to be seen in this marketplace for competitive products two, three years ago. [00:06:19] So all, you know, obscure names, smaller companies being really aggressive, offering higher rates, none of them from this kind of the standard bedrock insurance companies that we've all heard of. [00:06:31] A basic Google search, I'm not picking on anyone in particular, shows that most of the Companies offering the top rates were small companies that are now owned by private equity firms. So then it begs the question, why are they able to offer something so much better than the traditional companies do? [00:06:47] Now there's a little bit of security cache safety with a New York Life, for instance, New York Life knows they don't have to chase that top rate. Some people are just going to be real prudent, real conservative and say I like the strength of New York Life and I'm going to take a little bit lower rate for that. [00:07:04] But I say they're offering higher rates. They either know something that management of bigger companies don't know and that's very unlikely, or they are taking more risk than is traditionally acceptable. [00:07:15] Bingo. I think that's what is most likely happening. [00:07:18] So greater risk can be taken in several different ways. It doesn't necessarily just mean investments. [00:07:23] They can reduce profit margins dramatically or invest in lower grade bonds and speculative investments to produce higher returns. I have heard from more than one insider in industry, like someone who's very trustworthy, knows how insurance companies operate, who said a lot of these smaller companies were willing to lose money to sell a more competitive myga. They're not making any money on it. Well, if they're not making any money, how do they save solvents? So what they're trying to do is aggregate assets and we'll have to make up the losses in the future by pulling it away from other products. [00:07:53] Or they could be playing a gamble on interest rates or going to generate more profit from another part of the business. [00:08:01] Either way, something's going to lose. We hope it all works out because I don't want anybody to lose money. But understand the game that's being played and that is not ored out. [00:08:11] You buy a long term contract from insurance company, they make a commitment to you. You want to know that they're solid for the long term, not just, you know, intermediately playing an interest rate game or a shell game of sorts and hoping that, you know, it'll pan out. If you consider the fact that many of these companies are participating in investments that fall far outside the scope of traditional insurance industry management, that may be enough for the average person to pass up a few basis points in yield. We're not talking about a ton here, maybe half percent on the top end. So historically, insurance companies have always purchased high grade corporate bonds and Treasuries. [00:08:49] They subtract a spread for expenses and profits, but deliver the bulk of the yield to the annuity owners. Past several years, private equity companies have developed a bit of a shell game while hiding investments in reinsurance in offshore countries to escape reporting requirements of the US undisclosed assets backing the company. [00:09:07] That's what we're talking about. You can Google search Bermuda Triangle for insurers. [00:09:13] My friend Carrie Pector of the Retirement Income Journal has done a lot of research on it and you can also look if you want more information on it, I can tell you. And if I get enough feedback from people, if you really want to see it, I will try to invite Carrie on here. He can definitely explain this in more detail if you want to know what to look for. Because I've had a couple people inquire about it without me even releasing the information. But it has been mentioned before. [00:09:35] This is a very general view of things trying to fit it in a concise message here, but the practice has been well documented. It is not a secret. [00:09:44] Late last year, that's when Sentinel Security got in trouble. They had high concentration within a very risky asset class. It was airplane leasing was like 10% of their portfolio. That's an extremely risky business. Regulators didn't like it, nor should policyholders. It's likely that more of this will come in the next months and years as regulators attempt to add more accountability to the industry. [00:10:07] In order to verify a company is solid, they want to be able to see the assets they hold and verify that they're good. Extremely conservative management was once the only way to run in this industry. It is now something that requires additional diligence to verify. [00:10:24] I didn't make a single penny selling Sentinel products, but I spent a lot of hours talking to people about it and I haven't heard anything from other, you know, podcast publications. And I think some of those guys maybe sold the products, but I never did. But the top migrates are held by small companies that offer much more than many of the traditional companies you have heard of. Income products are similar for the most part, and I do not trust it. [00:10:49] As much as I tell everyone to get the best deal possible, it's important to consider all factors with rates or payouts being only one of them. I don't chase micro rates because there are other key features that set products apart, with safety being the biggest concern. I'll stick with products paying just a little bit less. Now. I've been right to avoid a specific company twice in my career. Now in this business, in the guaranteed space, we're shooting for 100% performance, so any hint of financial trouble is unacceptable. [00:11:21] I do not want anybody to lose money. I hope it works out for everyone. There's also the possibility if a company gets in trouble, you might have the money tied up for a bit. I don't want that either. So maybe it's easy to take a little bit less. Does it really affect the bottom line in the long run? Not a whole lot. [00:11:37] Keep your money with one of the ultra solid companies. If you do business here, that's what it's going to be. [00:11:41] So I like it. People say, well, I only want strong companies. Okay, good, because I only do strong companies. Annuities are supposed to give stability and balance to portfolio. It's surprising to me that I have to say this. There's no place for aggressive investment management in the insurance industry. [00:11:58] If it cost me a few deals, no problem. Okay, so there's another podcast I released a few years ago. The title says it all. You can go look at it if you want. It's about chasing rates. That was more about when rates were rising. But annuities and greed don't mix. [00:12:13] We're talking about safe, stable, prudent financial decisions based on fundamentals. That's what I do and that's what I will keep doing as long as I'm running this thing. So go ahead and chase rates if you want. I'm going to stick to the fundamentals. I appreciate you guys joining me and I hope you have a great weekend. This has been episode 188. I don't chase myga rates. [00:12:34] Please, like subscribe or comment on any of your favorite podcast platforms or on YouTube. [00:12:39] Comment if you have something to say, you agree or disagree. [00:12:43] And I don't care about the state guarantee fund. You can go back. There's a lot of stuff on the podcast. Learn to use a search bar and look for that. There's a ton of stuff in there. If I got to do it again, maybe I will rerun something else. But top right corner of any page on annuitystraighttalk. Com if you want to make an appointment and talk about your situation. [00:13:02] I appreciate you guys stopping by. I'll see you next week for episode 189. Okay, have a great day. Bye.