Multi-Year Guaranteed Annuity (MYGA) Rates

Shawn Plummer

CEO, The Annuity Expert

Multi-Year Guaranteed Annuity (MYGA) Rates

The following table offers the best MYGA rates sorted from the highest MYGA annuity rate to the lowest.

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. Multi-year guaranteed annuities 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.

Key Takeaways

  • Principal and Interest Rate Guarantees: The annuity protects your investment from market fluctuations, offering a choice of guaranteed interest rates for 1-20 years. It emphasizes the safety of your money and the advantage of compounded growth.
  • Tax Deferral for Growth: The annuity’s growth is tax-deferred, potentially increasing your contract value.
  • Efficient Legacy Transition: The annuity allows the contract owner to designate beneficiaries who will receive the contract value directly without the probate process, ensuring a smoother transition and access to funds.
  • Access to Funds: Unique among savings vehicles, MYGAs offers penalty-free access to up to 10% of your contract value (varies by product).
  • Flexibility: If you choose to annuitize your contract for lifetime income, different payout options are available.
  • Beneficiary Protection: Assets can be passed to beneficiaries, avoiding the probate process. Optional riders can enhance the amount beneficiaries receive.
  • Less Opportunity for Growth: Without market participation, growth opportunities are minimal compared to variable annuities, but there’s also less risk.
  • Inconsistent Rates: Some rates are fixed for a period and may drop afterward.
  • Interest May Not Keep Up with Inflation: This could result in losing buying power over time.
  • CD-Like Annuity: MYGA rates are usually higher than CD rates and compound yearly. Therefore, a contract with more limiting withdrawal provisions may have higher rates.

What Does MYGA Stand For?

MYGA stands for “Multi-Year Guaranteed Annuity.” An annuity contract provides guaranteed payments to the holder for a specified period, typically several years or longer. MYGAs are often used as a means of saving for retirement or as a way to generate a steady stream of income during retirement. They are issued by insurance companies and can be purchased either as a lump sum or through a series of payments. Multi-year guaranteed annuities are a form of a fixed annuity, which means that the payments are guaranteed, and the rate of return is fixed rather than tied to financial market performance.

Multi-Year Guarantee Annuity

How Do MYGAs Work?

In a multi-year guaranteed annuity, 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.

Related Reading: Current annuity rates

Multi-Year Guaranteed Annuities

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 can take it out of your multi-year guaranteed annuity.

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.

How Are MYGAs Taxed

The multi-year guaranteed annuity 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 401k 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 multi-year guaranteed annuity.

Multi-Year Guaranteed Annuity

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 401kYesNo
Death BenefitLump-SumLump-Sum
Multi-Year Guaranteed Annuity Rates

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.

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What is a multi-year guaranteed annuity?

A multi-year guaranteed annuity (MYGA) is a fixed annuity that provides a guaranteed rate of return for a specific period, ranging from three to ten years, offered by insurance companies. It offers fixed rates of return, tax-deferred growth, and principal protection, making it an attractive option for those seeking financial stability in retirement.

What are the fees on a MYGA?

Multi-year guaranteed annuities (MYGAs) typically do not have upfront fees or charges. However, the insurance company may deduct surrender charges if you withdraw funds before the end of the investment period.

What is the downside of MYGA?

The downside of a multi-year guaranteed annuity (MYGA) is its limited liquidity, as there are penalties for withdrawing funds before the end of the investment period. Additionally, MYGAs offer fixed rates of return, which may be lower than other investment options, such as stocks or mutual funds. This means that investors may miss out on potential gains that they could have earned by investing in other options.

Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

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

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