Interest rates are still very low. So low that retirees are being starved of income. With that in mind, some are employing annuities in unique ways to help increase interest income. In particular, one strategy being employed for older investors who want to boost income in the “safety” portion of their portfolio is to use multi-year guaranteed annuities (MYGAs) to boost interest income. MYGAs typically pay well in excess of what CDs and other cash management products pay. This is because the insurer behind the annuity can invest the capital in a diversified portfolio, including longer-term holdings. MYGAs are not FDIC insured like CDs, but they do come with contractual guarantees and are often from companies with great credit ratings.
FINSUM: This is a very good strategy for certain investors who can afford to tie up capital in an annuity and are looking for ultra-safe but above-market interest income relative to similar instruments.