Why A MYGA? The Yield Curve Inversion Is Now The Longest Since 1980
When the yield curve is inverted, meaning short-term interest rates are higher than long-term interest rates, it can create an environment where buying a 5-year Multi-Year Guaranteed Annuity (MYGA) may be considered advantageous for many Americans.
With the current US yield curve inversion now the longest since 1980, there are a few reasons why buying a 5-year MYGA could be seen as a potentially attractive safe money place.
1. Locking in higher rates: In an inverted yield curve environment, long-term interest rates are lower compared to short-term rates. By purchasing a 5-year MYGA, you can lock in a fixed interest rate for the entire term. This can be appealing because it allows you to secure a higher interest rate for a longer duration than other fixed-rate financial vehicles that may offer lower yields.
2. Certainty and stability: MYGAs provide a guaranteed fixed return over a specific period, regardless of market fluctuations. This stability can be valuable to savers seeking predictable income or those who prioritize capital preservation. In an uncertain economic environment associated with an inverted yield curve, the stability offered by a MYGA can be particularly appealing.
3. Portfolio diversification: Adding a 5-year MYGA to your financial portfolio can provide diversification benefits. While other financial assets such as stocks or bonds, may experience volatility during an economic downturn, a MYGA offers a stable, fixed return. This can help balance the overall risk of your portfolio and provide a source of safety.
4. Retirement income planning: MYGAs can be useful for individuals planning for retirement. By purchasing a 5-year MYGA, you can count on your money to grow at a guaranteed rate – and can turn your account into a guaranteed stream of income.
5. Risk mitigation: Inverted yield curves are often associated with economic downturns or recessions. During such periods, retirees and pre-retirees may seek to reduce their exposure to higher-risk assets and opt for more conservative, guaranteed-rate products like MYGAs. This approach can help protect against potential market downturns and provide a reliable income source.
However, it's important to note that financial decisions should be based on individual circumstances and financial goals. Give our licensed agents a call to discuss the best options for you.