What Is a Multi-Year Guarantee Annuity (MYGA)?

Not all retirement savings strategies need to be complex.

A Multi-Year Guarantee Annuity (MYGA) is one of the simplest annuity options available, offering guaranteed interest rates, principal protection, and tax-deferred growth. Sometimes referred to as a fixed-rate annuity, a MYGA functions similarly to a Certificate of Deposit (CD) but with key differences that make it a strong option for those looking to grow their savings without market risk.

How Does a MYGA Work?

A MYGA is a contract between you and an insurance company where you agree to leave your money in the annuity for a set period, typically ranging from 2 to 10 years or more. In return, the insurance company guarantees a fixed interest rate for the duration of the contract.

Here’s how it works:

You invest a lump sum into the MYGA.
The annuity earns a guaranteed interest rate for the selected term.
At the end of the term, you can withdraw your funds, renew for another term, or transfer to another annuity option.

Since MYGAs are not tied to the stock market, they provide a predictable return, making them a reliable choice for individuals looking for a low-risk savings option.

Key Features and Benefits of a MYGA

MYGAs offer several advantages that make them appealing to conservative investors:

Guaranteed Interest Rate – Lock in a fixed rate for the duration of your contract.
Principal Protection – Your original investment is secure, regardless of market conditions.
Tax-Deferred Growth – Interest compounds tax-free in a non-IRA account until withdrawn.
No Annual Fees – Unlike some annuities, MYGAs typically have no ongoing fees.
Flexible Term Options – Choose a contract length that aligns with your financial goals.
Penalty-Free Interest Withdrawals – Many MYGAs allow you to withdraw interest without penalties.
Simple and Transparent – No market exposure, hidden fees, or moving parts—just a straightforward growth strategy.

MYGA vs. CD: What’s the Difference?

MYGAs are often compared to Certificates of Deposit (CDs) because both provide a guaranteed interest rate for a set term. However, there are some key differences:

Tax Deferral: In a non-IRA account, MYGA interest compounds tax-deferred, meaning you don’t pay taxes until you withdraw funds. With CDs, interest is taxed annually.
Longer-Term Options: MYGAs can offer terms up to 20 years, whereas CDs typically max out at 5 years.
Insurance vs. FDIC Coverage: MYGAs are backed by state guaranty associations, while CDs are FDIC insured (coverage limits vary by state).
Potential for Higher Rates: MYGAs often offer higher interest rates than CDs for terms of 3 years or longer.

While MYGAs and CDs serve similar purposes, the right choice depends on your specific financial goals. Some people ladder MYGAs and CDs together for a diversified fixed-income strategy.

Can I Transfer or Exchange a MYGA?

Yes. MYGAs offer flexibility at the end of the contract term. When your MYGA matures, you can:

Withdraw the funds and use them as you see fit.
Renew the MYGA for another term at current rates.
Transfer the MYGA to another annuity product (such as an Immediate Annuity or Deferred Income Annuity) without triggering taxes through a 1035 exchange.

Additionally, MYGAs can be transferred within IRA accounts through an IRA-to-IRA transfer, maintaining tax-deferred status.

What Happens If I Need Access to My Money?

Most MYGAs allow for penalty-free withdrawals of earned interest. However, withdrawing from the principal before the contract ends may result in surrender charges.

Before purchasing a MYGA, it’s important to consider:

How long you can commit to keeping the funds in the annuity.
Whether you need access to your principal during the contract term.
The surrender charge schedule, which varies by annuity provider.

Is a MYGA Right for You?

A MYGA might be a good fit if you:

Want a safe, predictable growth option without stock market exposure.
Are comfortable leaving funds untouched for a set period.
Are looking for a higher fixed rate than what CDs typically offer.
Prefer tax-deferred growth over paying annual taxes on interest.

Because MYGAs are simple, fee-free, and guarantee returns, they are an attractive option for retirees and pre-retirees looking to preserve and grow their savings.

Final Thoughts

A Multi-Year Guarantee Annuity can be a great alternative to traditional CDs for those looking to earn higher fixed interest rates while keeping their principal protected. With guaranteed growth, tax advantages, and flexible term options, MYGAs offer a straightforward way to strengthen your financial future.

As with any financial decision, it’s important to review your options carefully and choose a MYGA that fits your individual goals. If you’re considering a MYGA, it may be helpful to compare current rates and contract terms to find the best fit for your needs.

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