MYGA
A Multi-Year Guaranteed Annuity (MYGA) is a fixed annuity that pays a guaranteed interest rate for a multi-year term, typically 2 to 10 years. The rate is locked at issue for the entire guarantee period. The carrier backs the guarantee from its general account. At the end of the term, the consumer can withdraw the full value, renew at the then-current rate, annuitize, or 1035-exchange into another contract. MYGAs are the closest annuity equivalent to a bank certificate of deposit, with three structural differences: higher typical yield, tax deferral, and state guaranty association coverage rather than FDIC.
A 67-year-old places $300,000 in a 7-year MYGA paying 5.85% guaranteed. The contract value at term end is $446,672 (compounded). Over the same 7 years, a 5% CD would have grown to $422,138. The MYGA produced approximately $24,500 more in pre-tax value due to the higher rate, plus additional after-tax value because the interest was tax-deferred rather than taxed annually.
Why it matters
MYGAs are the most straightforward annuity decision. There is no index, no participation rate, no rider — just a locked rate for a known term, backed by an insurance carrier. The decision reduces to two questions: is the rate competitive vs. CDs and Treasuries of similar duration, and is the carrier financially strong enough to honor the obligation for the full term?
How to evaluate
Compare the MYGA rate to Treasury yields of similar duration plus 50-150 bps. The carrier should be rated A or higher by A.M. Best. Check the surrender schedule (typically declining from 7-9% in year 1 to 0% at term end), the free withdrawal provision (often 10% per year), and the MVA (market value adjustment) terms. An MVA exposes the consumer to additional charges or credits if the contract is surrendered when interest rates have moved.
In the contract
Key terms: "guarantee period," "guaranteed interest rate," "surrender charge schedule," "market value adjustment," "free withdrawal amount," and "renewal interest rate" or "minimum guaranteed renewal rate."
Related terms
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