Education Center
MYGA & Fixed Rate Annuities
Multi-Year Guaranteed Annuities (MYGAs) offer a guaranteed interest rate for a set term — often compared to bank CDs but with potential tax and growth advantages.
What Is a MYGA?
A Multi-Year Guaranteed Annuity (MYGA) is a type of fixed annuity issued by a licensed insurance company. When you purchase a MYGA, the insurance company guarantees a fixed interest rate for a specified term — commonly 2, 3, 5, 7, or 10 years. At the end of the term, you can typically renew, withdraw, or roll the funds into a new contract.
MYGAs are often compared to bank CDs because both offer a guaranteed rate for a fixed term. However, there are important differences — most notably that MYGAs offer tax-deferred growth, meaning you do not pay taxes on the interest each year as it accumulates. You pay taxes only when you withdraw the funds, which may allow your money to compound more efficiently over time.
MYGA vs. Bank CD: Key Differences
| Feature | MYGA | Bank CD |
|---|---|---|
| Guaranteed rate | Yes — for the full contract term | Yes — for the full CD term |
| Tax treatment | Tax-deferred growth (pay taxes on withdrawal) | Interest taxed each year as earned |
| FDIC insurance | No — backed by insurance company claims-paying ability | Yes — up to $250,000 per depositor |
| State guaranty protection | Yes — up to state limits (varies by state) | No (covered by FDIC instead) |
| Early withdrawal | Surrender charges may apply; 10% free withdrawal often allowed | Early withdrawal penalty typically applies |
| Death benefit | Account value passes to named beneficiaries (may avoid probate) | Passes through estate |
| Minimum deposit | Typically $5,000–$10,000 | Varies by bank |
This comparison is for general educational purposes only. Individual products vary. Consult a licensed professional for product-specific information.
Who May Benefit from a MYGA?
MYGAs may be worth exploring if you have money in CDs, savings accounts, or money market funds that is not needed in the short term and you want to explore alternatives that may offer a competitive guaranteed rate with tax-deferred growth. They are also commonly used by people who:
- Are rolling over a maturing CD and want to compare alternatives
- Want guaranteed growth without market exposure
- Are in a higher tax bracket and want to defer taxes on interest income
- Are funding a non-qualified annuity with after-tax dollars
- Want a simple, straightforward product with no complex crediting methods
Important Considerations
Surrender Periods
MYGAs have surrender periods during which early withdrawals above the free withdrawal amount may be subject to surrender charges. Most contracts allow a 10% penalty-free withdrawal per year. Plan to keep the funds in the contract for the full term.
Tax Treatment
Growth inside a MYGA is tax-deferred. Withdrawals are taxed as ordinary income. If you fund a MYGA with pre-tax money (such as from a traditional IRA rollover), the entire withdrawal is taxable. If funded with after-tax money, only the growth portion is taxable. Withdrawals before age 59½ may be subject to a 10% federal tax penalty.
Carrier Financial Strength
MYGAs are backed by the financial strength of the issuing insurance company, not the FDIC. Choosing a carrier with strong financial ratings is an important part of the evaluation process.
Rate Competitiveness
MYGA rates vary by carrier, term length, and market conditions. Rates available today may differ from those available in the future. A licensed professional can help you compare current rates across multiple carriers.
Interested in Current MYGA Rates?
A licensed professional can provide current rate comparisons across multiple carriers at no cost or obligation.
This page is for educational purposes only. MYGAs are insurance products and are not FDIC-insured. Product features and rates vary by carrier and state. Consult a licensed insurance professional before making any financial decisions.