A multi-year guarantee annuity locks in a fixed interest rate for a set number of years while your money grows tax-deferred. Here is how it works.
A multi-year guarantee annuity, or MYGA, is a type of fixed annuity designed to help you avoid market volatility while your money grows tax-deferred. To get started, you purchase a single premium that fits your goals and budget, and the company agrees to pay you a fixed interest rate on that premium for a specific period of time.
You might notice that MYGAs sound a lot like fixed annuities. While all MYGAs are fixed annuities, not all fixed annuities are MYGAs. They share some features, but the main difference is how the interest is calculated and for how long it is guaranteed. A MYGA guarantees its rate for as long as the selected guarantee period lasts, usually between one and ten years, and then the rate resets based on current economic conditions, at the discretion of the issuing company.
At its simplest, a MYGA pays a guaranteed interest rate for a set number of years, usually one to ten, and grows tax-deferred until you decide what to do at the end of the term.
Here is how a MYGA works, along with the advantages and the tradeoffs to keep in mind.
You put in a single premium, and the insurance company pays you a fixed, guaranteed interest rate for the term you select. At the end of that term, you have choices: leave your funds in at a new interest rate declared by the issuing company, annuitize your funds and begin receiving an income stream, or cancel the annuity and withdraw your money.
When the guarantee period ends, you have three choices:
A MYGA offers a few key advantages:
There are also tradeoffs to weigh:
A MYGA may appeal to someone who wants a predictable, guaranteed rate for a set number of years without exposure to market losses. It can be a good fit for savers who value certainty and do not need access to the money during the guarantee period.
A MYGA is one of the simpler annuities: a guaranteed rate for a set term, with your money growing tax-deferred until you decide what to do at the end. The main tradeoffs are the surrender penalties and a growth ceiling compared with the market.
If you want to talk through how annuities work and whether one fits your situation, we’re happy to help. Consider scheduling a complimentary, no-obligation call. We can review your goals, walk through your income options, and figure out whether an annuity makes sense for you.
If you want to see current terms and how HiWire compares carriers on this product, our multi-year guarantee annuities page covers rates, term lengths, and what to look for in a contract.
How long is a MYGA rate guaranteed?
A MYGA guarantees its interest rate for as long as the selected guarantee period lasts, usually between one and ten years. After that, the rate resets based on current economic conditions, at the discretion of the issuing company.
What can I do at the end of a MYGA term?
You can leave your funds in at a new interest rate declared by the issuing company, annuitize your funds and begin receiving an income stream, or cancel the annuity and withdraw your money.
Are all fixed annuities MYGAs?
No. All MYGAs are fixed annuities, but not all fixed annuities are MYGAs. The main difference is how the interest is calculated and for how long it is guaranteed.
What is a market value adjustment?
Some MYGA contracts include a market value adjustment, which can be positive or negative, applied to the accumulated value of your investment if you make a full or partial surrender during the surrender charge period.
Annuities are long-term products designed for retirement income. All guarantees are backed by the financial strength and claims-paying ability of the issuing company. Annuities involve fees and charges, including possible surrender penalties. Withdrawals are generally subject to ordinary income tax, and a 10% federal penalty may apply if taken before age 59.5. Product and feature availability may vary by state. This material is for informational purposes only and is not intended as legal, tax, or investment advice. HiWire Financial offers insurance products and services.
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