What Is a MYGA and How Xoes It Work?
A multti year guarantee annuity, MYGA for short, is a type of fixed annuity designed for long-term financial goals.
The money you use to to purchase a MYGA, referred to as premium, grows tax-deferred at a guaranteed interest rate for the contract term you choose. There are MYGA's avaialble for almost any contract length but most commonly they are for a period of 3, 5, 7, or 10 years. Your premium (principal) is protected by the issuing insurance company, and your interest is credited at the fixed rate stated in your contract for the entire term. 100% of your premium deposit grows tax-deferred and taxes you earn on the growth are not paid until you withdraw your funds.
How a MYGA Works
- Guaranteed Rate: The insurer locks your interest rate for the full term, providing predictable growth.
- Tax-Deferred Growth: Earnings generally grow tax-deferred, meaning you typically pay taxes when you withdraw, not annually.
- Compounding Power: Interest can compound on previously credited interest, potentially enhancing long-term growth.
- Principal Protection: Your premium and credited interest are protected by the insurance company, regardless of market fluctuations.
- Term Choices: Choose a term that matches your goals; longer terms may offer different rates than shorter ones.
Liquidity and Options
Many MYGAs allow limited penalty‑free withdrawals each year—often interest earned or up to 10% of the account value—per contract rules. Optional features may include enhanced death benefits or waivers for nursing home care or terminal illness. Availability and terms vary by insurer and state.
Who Might Consider a MYGA?
- CD-style savers seeking higher, tax-deferred growth potential
- Pre-retirees and retirees who value guaranteed rates and stability
- Anyone prioritizing principal protection with predictable outcomes
