Multi-Year Guaranteed Annuities
Your Guide to Safe, Predictable Growth
When you’re looking for a way to grow your savings safely without market risk, a Multi-Year Guaranteed Annuity (MYGA) could be exactly what you need. Think of it as a straightforward agreement: you provide a lump sum to an insurance company, and they guarantee you a fixed interest rate for a specific number of years—typically anywhere from three to ten years.
Average MYGA Rates:
4.0-7.0%
Average CD Rates:
3.75-4.4%
What Makes MYGAs Different?
Guaranteed Growth
Your interest rate is locked in for the entire contract period. No surprises, no market ups and downs—just steady, predictable growth.
Principal Protection:
Your initial investment is completely safe from market fluctuations. You’ll never lose money due to economic volatility.
Tax-Deferred Growth
Your money grows without annual tax obligations until you decide to make withdrawals, allowing for more efficient compounding over time.
Flexible Term Length
Choose a contract length that fits your timeline, whether that’s three years, ten years, or in-between.
How MYGAs Work
The process is refreshingly simple. You make a lump-sum payment to an insurance company, and your money grows at the guaranteed rate throughout your chosen term. At the end of the contract period, you have several options: take your principal plus interest, renew the contract (potentially at a different rate), or transfer the funds to another type of annuity using a 1035 exchange in order to avoid tax penalties.
Most MYGAs offer some flexibility during the contract term. Many allow you to withdraw up to 10% of your account value annually without penalties after the first year, and some provide access to funds for specific emergencies, like medical expenses.
Example Earnings Illustration
Considering $100,000 investment for a 7-year term
| Year | Rate | Balance | Earnings | Withdrawal Allowance |
|---|---|---|---|---|
| 1 | 4.7% | $104,700 | $4,700 | $0 |
| 2 | 4.7% | $109,621 | $4,921 | $10,962 |
| 3 | 4.7% | $114,773 | $5,152 | $11,477 |
| 4 | 4.7% | $120,167 | $5,394 | $12,017 |
| 5 | 4.7% | $125,815 | $5,648 | $12,582 |
| 6 | 4.7% | $131,729 | $5,913 | $13,173 |
| 7 | 4.7% | $137,920 | $6,191 | $13,792 |
Is a MYGA Right for You?
MYGAs work particularly well for people who are:
Approaching Retirement
If you’re within 10-15 years of retirement and want to protect a portion of your savings from market volatility while still earning competitive returns.
Seeking CD Alternatives
Those who want higher yields than CDs offer, along with tax advantages and some liquidity options.
Review today’s MYGA rates.
Find the right annuity to maximize your earnings and secure your future.
Continued
Looking for Predictable Growth
Investors who value knowing exactly what their money will earn and when they can access it.
Bridging Financial Gaps
People who need to park money safely for a specific time period, such as between retiring and claiming Social Security.
Important Considerations
Liquidity Limitations
While most MYGAs offer some penalty-free withdrawal provisions, they’re designed for money you won’t need full access to during the contract term. Early withdrawals beyond the penalty-free amount result in surrender charges.
Insurance Company Strength
Unlike FDIC-insured CDs, MYGAs depend on the financial stability of the issuing insurance company. Choose companies with strong AM Best ratings.
Inflation Risk
Fixed rates won’t adjust for cost-of-living increases, so consider whether the guaranteed rate will maintain your purchasing power over time.
Current Market Environment
Today’s interest rate environment has made MYGAs particularly attractive. Current rates often exceed what you’ll find with certificates of deposit, with some five-year MYGAs offering rates above 6%. Here’s a snapshot of recent competitive rates:
Tax Considerations Made Simple
MYGAs offer tax advantages that many people find appealing. Unlike CDs, where you pay taxes on interest annually whether you withdraw money or not, MYGAs allow your interest to compound tax-deferred until you actually take distributions.
Qualified vs. Non-Qualified Purchases
If you buy a MYGA with retirement account funds (qualified), you’ll pay ordinary income tax on everything you withdraw. If you use after-tax money (non-qualified), only the growth portion is taxable when withdrawn—your original investment comes back tax-free.
Multi-Year Guaranteed Annuity
Savings Account
Certificate of Deposit
Insurance Company
Bank
Bank
6.25%
Rated not guaranteed
2.15%
3–10 Years
Any
3 Months – 5 Years
$10,000 +
Any
$1,000 +
Tax-deferred interest
Interest taxed Immediately
Interest taxed Immediately
Up to 10% of account value each year
Usually 6 withdrawals per month
No free withdrawals
Backed by Issuer
FDIC Insured
FDIC Insured
How MYGAs Compare to Alternatives
MYGAs vs. CDs
While both offer guaranteed returns and principal protection, MYGAs typically provide higher interest rates and tax-deferred growth. CDs are FDIC-insured while MYGAs are backed by insurance companies and state guaranty associations.
MYGAs vs. Traditional Fixed Annuities
The key difference is rate certainty. Traditional fixed annuities might guarantee rates for only the first year or two, while MYGAs lock in your rate for the entire contract term.
Making Your Decisions
Before choosing a MYGA, consider your timeline, liquidity needs, and how it fits into your overall financial plan. A MYGA could be an excellent choice if you’re comfortable committing funds for the contract term and also value predictable, guaranteed growth over potentially higher but uncertain returns.
MYGAs vs. CDs
While both offer guaranteed returns and principal protection, MYGAs typically provide higher interest rates and tax-deferred growth. CDs are FDIC-insured while MYGAs are backed by insurance companies and state guaranty associations.
Key Questions to Ask Yourself
Can I commit this money for the full contract term?
Am I comfortable with the guaranteed rate versus other investment options?
Do I need any access to these funds during the contract period?
How does this fit with my other retirement savings strategies?
MYGAs offer a clear path to guaranteed growth without market risk—perfect for conservative investors who want better returns than traditional savings accounts or CDs can provide. When interest rates are favorable like they are today, locking in these guaranteed rates for multiple years can be a smart financial move.
The key is understanding what you’re getting: steady, predictable growth that lets you sleep well at night, knowing exactly what your money will be worth when you need it most.
Have more questions? Let’s chat.
A live advisor is standing by to answer your questions.
Jeremiah Konger
Annuity Advisor
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