Multi-Year Guaranteed Annuity: How to Choose a MYGA

Shawn Plummer

CEO, The Annuity Expert

A multi-year guaranteed annuity is an investment that guarantees the individual an annual return for a set number of years. This can be very beneficial because it offers stability and protection against inflation, which has steadily increased over the last few decades. For this guide, we will discuss what you need to know about choosing a multi-year guaranteed rate annuity, including:

What are the benefits? What kind of returns should I expect? Who qualifies for these investments? How do I choose between different types of annuities?

What is a Multi-Year Guaranteed Annuity (MYGA)?

A MYGA, or multi-year guaranteed annuity, is a fixed annuity that offers a guaranteed fixed interest rate for certain periods, which usually last from two to 10 years. MYGAs are more appropriate for someone closer to retirement who prefers tax deferral and a guarantee on their investment return.

Buying an MYGA is one way to supplement investment accounts and Social Security payments in retirement by earning a guaranteed interest rate. In addition, you won’t owe taxes on the growth until you start taking payments.

They are also known as CD annuities since they provide some of the features of certificates of deposit, such as a specified term and a guaranteed fixed interest rate.

What Is A Multi-Year Guaranteed Annuity And How Do They Work?

How Do MYGAs Work?

In an MYGA, you agree to pay an insurance company a premium for a guaranteed fixed interest rate on the contribution for a specific time. The term can be two, three, five, ten, or any number of years up to twenty.

You can either cash out the premium and interest earned or extend your contract after the accumulation period. If you renew your contract, the interest rate may differ from what you originally agreed to.

Another alternative is to move the money into a different type of annuity, like a fixed index annuity. A 1035 exchange allows you to do so without incurring a tax penalty.

Withdrawal Provisions

If you want to withdraw money from the annuity, you may have to pay fees called surrender charges. However, your contract might let you take some money out without paying yearly fees, called penalty-free withdrawals. Ask the insurance company about this when you get the annuity.

Your contract may also allow you to take money out for emergencies. For example, if you need money to enter a nursing home, you may be able to take it out of your MYGA.

Before withdrawing funds from a multi-year guarantee annuity early, remember that one of the primary advantages of an MYGA is that they are tax-deferred. As a result, the money withdrawn won’t accumulate triple compounding interest over time.

Multi-Year Guaranteed Annuity (MYGA) Rates

MYGA rates vary slightly from carrier to carrier and change daily. For example, in December 2022, the best rate for an MYGA with a 5-year surrender period was 5.60 percent, and the best rate for an MYGA with a seven-year surrender period was 4.50 percent. The best rates were 5.65 percent and 5.70 percent for MYGAs with five-year and seven-year surrender periods, respectively.

MYGA rates are usually higher than CD rates and compound each year. Therefore, a contract with more limiting withdrawal provisions may have higher rates.

How Are MYGAs Taxed

The MYGA allows you to defer interest taxes and compound them each year. Because the tax only occurs when you withdraw the funds, this may lead to a considerable increase in wealth. It’s similar to investing in an IRA or a 401(k) but without restrictions.

The tax rules change depending on the type of funding in an MYGA annuity. The principal and interest will be taxed when income is withdrawn from a qualified annuity (IRA Annuity). Only the interest earned is taxed when income is withdrawn from a nonqualified MYGA.

Multi-Year Guaranteed Annuities vs. Traditional Fixed Annuities

MYGAs are a type of fixed annuity. MYGAs guarantee the same interest rate for the entire duration of the contract. Traditional fixed annuities guarantee the interest rate only for a portion of the term of the contract and then offer a different rate later on.

MYGA vs. CDs

Both MYGAs and CDs provide a guaranteed return with a guarantee on the principal. As a result, CDs and MYGAs are safer than equities like Vanguard, but the rate of return is lower.

FeatureMYGACD
Who OffersInsurance CompanyBanks
Premium Amounts$2,500 to $1 Million$500 – No Maximum
Terms2 Years to 20 Years3 Months to 7 Years
Guaranteed Interest RatesUp to 3.25%Up to 1.25%
Triple CompoundingYesNo
Principal ProtectionYesYes
Can Lose Money?NoNo
Liquid After Term100%100%
How Are Gains Taxed?Tax-DeferredTaxed Annually
Annual LiquidityUp to 10% AnnuallyNo Liquidity
Who Protects My Money?Insurance Company/SGAFDIC
Accepts IRAYesNo
Accepts 401(k)YesNo
Death BenefitLump-SumLump-Sum

Next Steps

A multi-year guaranteed annuity (MYGA) may be the right choice if you want a safe and stable investment option. These contracts offer high-interest rates that beat most CD options and protection from stock market fluctuations. Your money will also grow tax-deferred, meaning you won’t have to pay the tax on your earnings until you withdraw them and start receiving income. And if something happens to you before your contract matures, your beneficiaries will receive the death benefit included in your agreement.

Request a quote today to see how much interest you could earn with multi-year guaranteed annuities!

Multi-Year Guaranteed Annuity (Myga) Rates

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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