What Is a MYGA?
A multi-year guaranteed annuity (MYGA) is a fixed annuity that guarantees a specific interest rate for a set number of years — typically 3, 5, 7, or 10 years. At the end of the term, the rate resets to whatever the carrier is offering at that time, or you can surrender, roll over to a new contract, or begin taking income.
MYGAs are often compared to bank CDs. Both offer a fixed rate for a set term. The key differences: MYGAs grow tax-deferred, have no FDIC insurance, are backed by the carrier's financial strength, and are regulated by state insurance departments.
How MYGA Interest Works
The interest rate is declared and guaranteed at the time of purchase. It does not fluctuate. Each year, the credited interest is added to your accumulation value and compounds going forward. Because the growth is tax-deferred, no taxes are owed on the credited interest until you withdraw.
Who Uses MYGAs?
MYGAs appeal to savers who want:
- A predictable, market-risk-free rate of return
- Better rates than short-term bank products
- Tax deferral on interest growth
- A conservative allocation within a diversified retirement portfolio
They are commonly used to hold cash that is destined for retirement income within the next 3 to 10 years.
Surrender Periods and Liquidity
MYGAs have surrender periods aligned with the rate guarantee term. A 5-year MYGA typically has a 5-year surrender period. Most allow penalty-free withdrawals of up to 10% per year. At the end of the term, the full value is accessible without surrender charges.