As anybody who has lived in Prescott for any length of time knows, we commonly are found on top 10 lists for the best places to retire in the United States. Our proximity to beautiful lakes, hiking, outdoor recreation, and a lively downtown entertainment district keeps tourists streaming in for vacation and retirees moving to enjoy their golden years. What this also means for Prescott is that we have more retirees per capita that are on a fixed income than most cities across Arizona and the US. This article will look at a financial tool that Prescott area residents can use to increase their income during an election year and even a recession.
As anybody who has lived in Prescott for any length of time knows, we commonly are found on top 10 lists for the best places to retire in the United States. Our proximity to beautiful lakes, hiking, outdoor recreation, and a lively downtown entertainment district keeps tourists streaming in for vacation and retirees moving to enjoy their golden years. What this also means for Prescott is that we have more retirees per capita that are on a fixed income than most cities across Arizona and the US. This article will look at a financial tool that Prescott area residents can use to increase their income during an election year and even a recession.
A quick search of local bank interest rates across Arizona and the country can leave retirees on a fixed income feeling overwhelmed and a little discouraged. Most banks are offering roughly 0.06% on checking accounts and only 0.16% on money market accounts. Even if a retired couple had $1,000,000 to put into a money market account, they would still only be getting roughly $1,600 back on that large deposit annually. That’s like winning a dime in the lottery. Low-interest rates are really bad news when you consider inflation that often accompanies recessions, potential tax increases, the uncertainty of an election year, and volatile markets.
Enter The MYGA
Banks are currently offering less than 0.20% on most checking, savings, and money market accounts. There is, however, a tool that most people have never heard of, let alone considered using to build their own wealth. The financial instrument that many retirees on a fixed income should familiarize themselves with is a Multi-year Guaranteed Annuity (MYGA for short). A MYGA is unique from other accounts. It offers a fixed percentage back on the money parked there over a contractually agreed term. MYGAs also do not force users to park their money for extended periods, like other investments. Recent MYGA rates have offered returns of up to 3.50% for five years, even less in some cases. This increase in interest can be life-changing for individuals on a fixed income. Let’s take a look at that same $1,000,000 investment parked in a money market account offering 0.16% vs. a Multi-Year Guaranteed Annuity.
Couple A: If this couple placed their $1,000,000 savings into a money market account at the current average at 0.16%, they would get back roughly $1,600 per year. They would have made $8,000 on their money at the end of five years if they spent the $1,600 annually and not compounding the interest earned.
Couple B: If this couple placed their $1,000,000 savings into a money MYGA at the current at 3.5%, they would get back roughly $35,000 per year. At the end of the same five year period, they would have made $175,000 on their money, assuming all of the same variables and spending habits.
It is easy to see how quickly the power of interest can impact a retiree’s lifestyle, both positively and negatively.
Why A MYGA Is A Great Option Specifically For Prescott Residents & Retirees
One of the tools that we hear quite a few retirees considering is a reverse mortgage to help create income in their retirement years. Reverse mortgages can be an excellent option for many couples in retirement; however, they are not without risk (especially in our local real estate market). Many reverse mortgages will give you a monthly payment in exchange for ownership of your home. The monthly payment you receive is usually determined by your home’s value at the time you took on the reverse mortgage. As states with larger population centers like California are seeing residents leave for states like Arizona and specifically cities like Prescott, this might not be the best move. As such, we may very well see home prices rise here faster than other parts of the country. This could easily mean that the money you see from a reverse mortgage might not keep pace with the equity you would have gained from retaining ownership of your home.
A Multi-Year Guaranteed Annuity allows you to retain ownership of all of your assets while helping you grow them at a substantially faster rate than other financial tools. To help Arizonans explore how a Multi-Year Guaranteed Annuity (MYGA) works and why it is such an excellent fit for individuals in a hot real estate market like ours, we will be holding a virtual seminar on 00/00/2020 at 00:00 PM. Registration for this event can be found here www.register.com/register; bring your questions.
We look forward to seeing you there.