What Is a MYGA? (Multi-Year Guaranteed Annuity)
A Multi-Year Guaranteed Annuity (MYGA) is like a tax‑deferred CD issued by an insurance company. You give the insurer a lump sum, they guarantee a fixed interest rate for a set number of years (commonly 2–10), and your interest compounds tax‑deferred until you withdraw. There’s no stock market exposure, your principal is protected by the insurer’s claims‑paying ability, and at the end of the term you can renew, reposition, take income, or cash out—depending on your goals.
Quick Definition & Key Takeaways
Product Type: Fixed deferred annuity (not market‑linked)
Core Feature: Guaranteed multi‑year interest rate (level for the term)
Common Terms: 3, 5, 7, 10 years (some 2 or niche variations)
Tax (Non-Qualified): Interest grows tax‑deferred; taxed when distributed
Access: Limited annual penalty‑free withdrawal; excess subject to surrender charges (and possibly MVA)
End of Term: Renew, 1035 exchange, start income, partial or full withdrawal
See Current Rates: Live MYGA Rates Below
Live MYGA Rates
Below is a dynamically updating feed of top MYGA rates. Use it to compare current multi-year guarantee periods. For personalized suitability, feel free to schedule a quick call.
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How a MYGA Works (Plain English)
- You apply and fund the contract (non-qualified cash, IRA rollover, etc.).
- The insurer credits a fixed, contractual interest rate each year for the chosen term.
- Interest compounds inside the contract without annual taxation.
- You may withdraw a limited “free” amount annually (often 5–10% or interest).
- Excess early withdrawals may trigger surrender charges and a Market Value Adjustment (MVA).
- At maturity you choose: renew, move (1035), convert to income, or exit.
Suitability is about matching term length and liquidity features to your time horizon and goals—especially if this is part of your “safe” allocation.
MYGA vs CD vs Fixed Indexed Annuity (FIA)
| Feature | MYGA | Bank CD | Fixed Indexed Annuity (FIA) |
|---|---|---|---|
| Primary Appeal | Guaranteed multi-year rate + tax deferral | Simple guaranteed rate + FDIC (limits) | Downside protection with index-linked upside potential |
| Rate Behavior | Level for the term | Level for the term | Varies; based on index methodology (caps/spreads) |
| Tax on Growth (Non-Qualified) | Deferred until withdrawn | Taxed annually (1099-INT) | Deferred until withdrawn |
| Early Access Penalty | Surrender charges + possible MVA | Bank interest penalty | Surrender charges; indexing mechanics |
| Market Exposure | None | None | No direct loss risk; returns vary |
| Typical Duration | 2–10 years | 6 months–5 years (some longer) | 7–10+ years common |
| Use Case | Predictable compounding | Ultra-short, simple savings | Potentially higher credited growth |
Compare deeper: MYGA vs Indexed Annuity
Where a MYGA May Fit
Common Use Cases
- Reallocating maturing CDs
- Pre-retirement asset parking
- Stabilizing a conservative bucket
- Bridge to future income decision
- Supplement to bond allocation
- Tax deferral for idle cash
Helps If You Want
- Known growth path
- Limited administrative hassle
- Deferral vs annual taxation
- Structure for ladder building
- Predictable mid-term horizon
- Optional diversification of carrier risk
MYGA Ladder (Brief Teaser)
A MYGA ladder spreads your funds across staggered maturities (for example, 3, 4, 5, 6, and 7-year guarantees). Each year, one contract matures—giving you flexibility to reinvest at then-current rates, shift to income, or take withdrawals.
Goal: Balance yield, reinvestment timing, and liquidity. Explore the full MYGA Ladder Guide.
Rate & Compounding Example
Assume:
- Deposit: $100,000
- Guaranteed Annual Rate: 5.10%
- Term: 5 years
Future Value (Tax-Deferred): FV = 100,000 (1.051)^5 ≈ 128,000
If that same yield were taxed annually at 24% in a CD: After-tax effective rate ≈ 3.876%; FV ≈ 100,000 (1.03876)^5 ≈ 120,800.
Illustrative tax deferral difference: ≈ $7,200 (simplified; real outcomes vary).
Not a quote. Rates change. Check current rate sheet.
Tax Treatment Basics
- Non-Qualified: Interest accumulates tax-deferred; withdrawals taxed as ordinary income (LIFO) until gain is distributed.
- Qualified (IRA/401k): Tax deferral already exists; value is the guaranteed rate.
- 59½ Rule: Withdrawals before 59½ may face a 10% IRS penalty on taxable portion.
- 1035 Exchanges: Can move from one annuity to another tax-deferred (proper structuring required).
Consult a tax professional for personalized guidance.
Risks & Considerations
| Risk / Factor | Meaning | Mitigation |
|---|---|---|
| Interest Rate Risk | Rates may rise after you lock in | Ladder; choose suitable term length |
| Inflation Risk | Fixed rate may lag high inflation | Pair with growth-oriented assets |
| Surrender Charges | Costs on excess early withdrawals | Align term with liquidity needs |
| MVA (if present) | Adjusts value on early surrender | Understand formula; avoid early exits |
| Insurer Credit Quality | Claims-paying ability risk | Review ratings, diversify carriers |
| Opportunity Cost | Other assets might outperform | Define “safe money” role clearly |
Evaluating a MYGA / Carrier Due Diligence
- Current credited rate vs peer set
- Financial strength ratings (A.M. Best, S&P, Moody’s, Comdex)
- Surrender schedule length and decline pattern
- Free withdrawal provision (5–10%? Interest only?)
- MVA presence and general mechanics
- Renewal options and default window timing
- Minimum premium and reinvestment flexibility
- Carrier rate / renewal history (if available)
See also: Annuity Company Ratings
End-of-Term (Maturity) Options
- Renew: Elect a new guarantee period (confirm if auto-renews by default).
- 1035 Exchange: Move into a new MYGA, FIA, or income product without current taxation.
- Systematic Income: Begin withdrawals under a plan (tax as applied).
- Annuitize: Convert to guaranteed income stream (irreversible in most cases).
- Full Surrender: Exit contract; taxes due on gain.
Best practice: Calendar a reminder 30–60 days before maturity.
Frequently Asked Questions (FAQ)
Is a MYGA safe?
Not FDIC insured. Backed by the issuing insurer’s claims-paying ability. State guaranty associations provide limited protections—consult state resources.
Can I put a MYGA inside an IRA?
Yes. The benefit then is the guaranteed rate and contract design, not added tax deferral.
How much can I withdraw annually without penalty?
Many allow 5–10% of prior anniversary value or accumulated interest. Contract terms vary.
What if I need more money early?
Excess withdrawals may trigger surrender charges + MVA if applicable. Consider a ladder for flexibility.
Does the rate ever change mid-term?
No. The contractual MYGA rate is fixed for the entire guarantee period; a new rate applies only after renewal.
How is interest taxed (non-qualified)?
Withdrawals follow Last-In, First-Out (LIFO): taxable gain is distributed first as ordinary income.
MYGA vs indexed annuity—which is better?
Depends on goals. MYGA = certainty. Indexed annuity = potential for higher credited interest but variable outcomes.
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Disclosure: This material is educational and not individualized tax, legal, or investment advice. Product availability, features, and rates are subject to change. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurer. Withdrawals of taxable amounts are subject to ordinary income tax, and if taken before age 59½ (in non-exempt situations) may be subject to a 10% additional tax. State guaranty association coverage limits vary and are not a substitute for due diligence. Always consult your tax or financial professional before purchasing or exchanging an annuity.
