Multi-Year Guarantee Annuities (MYGAs)
You lock in a fixed interest rate for a set term (1-10 years). At the end of the time period, the company will declare a new interest rate and you can choose to continue the contract or cancel it and receive the annuity proceeds.
Key Points
Guaranteed interest rate, guaranteed interest rate term
Choose the length (common options are 3, 5, 7 or 10 years); the advertised Annual Percentage Rate (APR) is locked in for that entire period.
Easy apples-to-apples comparison
Unlike many annuities with moving parts, a MYGA generally has no complicated riders or market formulas.
Tax-deferred compounding
Interest grows without annual taxation, boosting your effective yield—especially valuable if you won’t need the funds until retirement.
APR vs. APO—don’t confuse them
Sales materials sometimes quote an Annual Payout Percentage (APO) that includes a return of your own principal. Focus on APR: that is the true rate of return.
Financial strength
Assets at the issuing company are generally invested primarily in high-grade bonds; insurers are audited by state regulators and must hold substantial reserves.
Know the liquidity rules
Early withdrawals before the interest rate term and surrender charge period will trigger surrender charges, and if you’re under 59-1/2, an additional IRS penalty, so match the term to your time horizon.
Additional Important Information
Work with an experienced professional
A licensed, independent insurance agent and advisor can help you compare carriers, verify financial strength ratings, and explain any optional benefits or riders.
Tax strategy
MYGAs are often used inside IRAs to preserve principal or outside qualified plans to create a future tax-planning bucket with deferred growth.
Coverage Summary
Feature
What to Expect
Typical Surrender Charge Periods
3, 5, 7, 10 years (longer term = higher rate)
Guarantees
Principal and credited interest; subject to insurer.
Free-withdrawal allowance
Most contracts allow 10 % of the account value per year without surrender charge
Taxation
Interest taxed only when withdrawn; ordinary income rates apply. For annuities within a qualified plan, all withdrawals are fully taxable. Withdrawals before age 59-1/2 are subject to a 10% IRS penalty.
When is a MYGA annuity a good choice?
A MYGA may be an appropriate option if you want a guaranteed and predictable place to grow your money over a set period of time—usually 3 to 10 years—without the ups and downs of the stock market.
In short, if you want steady, tax-deferred growth with no surprises, and you can commit your funds for a fixed term, a MYGA might be the right fit.
Some factors that may make it appropriate for you:
- You want a guaranteed interest rate that won’t change, even if the market or banks do.
- You don’t need immediate access to the money and are comfortable leaving it alone for a few years.
- You’re close to or in retirement and want to protect part of your savings from risk.
- You value simplicity—MYGAs are easy to understand with no complicated terms or moving parts.
Bottom Line
A MYGA provides predictable, tax-advantaged growth for conservative consumers who can commit funds for a defined period—without the market’s ups and downs.
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