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Market Linked  CDs – Secure 12.4% Average Yield

Market linked CDs offer the protection of a traditional CD as well as the security of being FDIC insured.  These Market Linked  CDs – Secure 12.4% Average Yield  give clients a more attractive rate of return versus bank issued CDs. This is a great option if you want a higher rate of return on your investment. Crowe and Associates would like to help you make the most of your money.  The better investments you make the happier you will feel when you think about your retirement.  In fact, you will be able to do more of the things you always wanted to do!

In general:

Market linked CDs have an unlimited interest earning potential as variable interest can be unlimited (depending on the product).  They offer a return of 100% of  your deposit when they mature.  In fact, these CDs are FDIC insured up to at least $250,000 per bank.  MLCDs pay the greater of either fixed or variable rate interest.  They offer fixed interest rate products that pay minimum 1% annually.

Market lined CD issuers include JPMorgan, Barclays, Goldman Sachs and Bank of the West.

MARCH  2015 RECOMMENDATION

• Goldman Sachs 7 Year Multi-Asset Index Linked CD
• At maturity this MLCD will pay 200% of the point to point MOBU index gains
• Best Case Scenario = 100% of your deposit back + unlimited upside potential
• $100,000 invested in this CD 7 years ago would be worth $186,800 today (12.40% APY)
• Worst Case Scenario = 100% of your deposit back

If you want to learn more about how to invest in a Market Linked CD, either contact the office at 203-796-5403 or via email at admin@croweandassociates.com.  We are always here to help you with any investment or insurance need you may have.  Please feel free to contact us with any question or concern you have.

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CD rates are currently at an all time low.   The average 5 year CD rate in Connecticut is 1.08%.    (To see local rates, Bankrate.com is a good site to use  CLICK FOR BANK RATE SITE )  Locking money up for 5 years at a rate below 2% is almost a guarantee that you will not keep up with inflation which is averaging over 3% per year.

Clients that like the idea of using CD and feel safe being backed by FDIC insurance, should consider using market linked CD’s.  Market CD’s work much like a normal CD.  They have a set term such as 3, 5 or 7 years and they are FDIC backed.  The difference is in how they credit interest.   The Market link CD will credit anywhere from 1% to 8% depending on market conditions.  In a poor performing market, the CD will never yield less than 1% but in a stronger performing market, the investor can make as much as 8%.

The CD uses a simple formula to determine annual interest.  They use a grouping of 8 stocks.  Any stock that ends the year the same or at any type of increase credits 1% to the account.  If 5 stocks are flat or up to any extent, the investor will get a 5% interest credited.  If all 8 are flat or up, they will get 8%.  Conversely, if all the stocks are down they will only be credited the base 1% for the year.

At the end of the term, the purchaser can take their money without any penalty.  This is a good option for those that are adverse to risk.  Using market linked CD’s will at least give them a chance to out pace inflation vs. a fixed CD at 1.5% which is essentially guaranteeing an annual loss vs. inflation.

With the 10 year treasury at 1.5%, CD rates are at 30 year low yields.  The current 5 year CD rate in Connecticut is now around 1% which is actually a bit lower than the 3 year CD rates being offered. Bankrate.com is the best place to find all local CD rates available. Click her to go to BANKRATE 

With rates this low, it is wise to look at alternatives and here I will talk about  2 of them which are Fixed annuities and Market linked CD’s.

Market linked CD’s: (Also called brokerage CD’s) are easy to understand.  They are CD’s which provide a return based on the performance of a bucket of stocks.  If the stocks are even or show some gain for the year, you get a stated return such as 6% (Where offers are currently). If the bucket of stocks is down for the year, 0% is credited to the account.  The account can never have a negative return for the year and with current CD rates at 1% yields, the market linked CD is likely to outperform the traditional CD by a substantial margin.

Fixed annuities: Fixed annuities work just like a CD.  The money goes into the account for a stated amount of time such as 5 years.  During that time the account is credited with a fixed interest rate.  At the end of the term, the client is able to walk away with the money without any type of penalty.  The big difference now is how much more a fixed annuity is paying vs. a CD.  There are multiple fixed annuities offering 2% on a 3 year fixed contract and 3% on a 5 year contract.  There are 10 year contracts available at 4% for those looking for a long term rate but 10 years is probably not a good thought given the current rate conditions.

There is more money being moved into fixed annuities  than at any other time in history which is no surprise given the rate advantage.  Still, people put money into CD’s at .5% to 1% with their local banks.  The most logical reason they continue to accept such low rates is due to a lack of understanding about fixed annuities and how they work.

Guggenheim has come out with a new fixed annuity with rates guaranteed for the entire term.  Terms range from 3 to 10 years depending on your preference.   Details of the plan are below including a link for a product brochure.

Guggenheim Life – “Preserve Multi-Year Guaranteed Annuity”
Year Founded: 1985
Total Assets: $5.9 billion
Interest: This annuity pays a fixed and “guaranteed” interest rate that varies, depending on the term you choose and the amount you deposit.
Deposit Amounts $250,000 PLUS

Click For Guggenheim Fixed Annuity Rates
Term: Your choice of 3-10 years (walk away, no annuitization required).
Sales Charge: None
Minimum Deposit: $10,000 non-qualified / $5,000 qualified

Maximum Deposit: $1,000,000

Issue Ages: 0-90
Rate Lock Protection: 45 Days
Penalty Free Withdrawals: 10% of the previous anniversary account value in year two and later. Also waives withdrawal penalties upon death or annuitization. Includes Nursing Home Care and Terminal Illness Riders.

Preserve MYGA Guggenheim

Email Edward Crowe for additional information or applications:  Edward@croweandassociates.com

Bank CD rates are averaging 1% to 1.8% on a 5 year fixed basis nationally. Rate offerings have not been this low in many decades. With the current inflation rate nearing 3%, a fixed CD at less than 2% will not even keep pace. Given this dynamic, it makes sense to look for alternatives.

Insurance companies offer interest rates for a fixed period of years similar to CD rates. Like a CD, once the fixed term expires, you are able to either roll over the account to another fixed period or take your money and go elsewhere with it. Historically, insurance companies have offered rates that are competitive with CD rates. Currently they are offering rates that are often 50% higher than the equivalent CD rate.

Insurance company offerings are not FDIC insured by they are backed by the Guarantee Association in each state. The amount covered by the Guarantee Association varies from $200,000 to $500,000 depending on the state the application is signed in. (For example: Connecticut is $500,000)

There are currently 2 insurance companies offering a 5 year fixed rate at 3.6%. Another is offering a rate of 3.15% and they offer it with a 100% return of premium feature that can be used at any time. Given the low nature of the rate environment, a return of premium feature may be useful. Both companies are A rated and owned by larger A rated parent companies.

The insurance company offerings provide a higher return on a fixed basis and should be considered as an alternative to CD’s due to their more competitive yields.