When deciding between a Simple vs. Compound Interest Annuity MYGA, it comes down to how you plan to use the annuity during the term—not just the final maturity value. While two contracts can be engineered to reach the same value at maturity, their path of growth differs. That path impacts interim liquidity, interest-only income, and what beneficiaries receive if death occurs before maturity.

What’s the real difference?

Simple interest credits the stated rate on the original premium each year, so interim account values are typically higher in years 1–(term-1). Compound interest credits interest on a growing base, which can catch up by maturity but may show lower interim values than an equivalent simple-interest design.

Illustrative 5-Year example (same maturity value)

Example assumptions: $100,000 premium; a simple-interest MYGA at a rate designed to match a compound-interest MYGA by year 5. Over the first four years, the simple-interest version generally shows a higher account value—useful for free withdrawals, potential surrender values, and interim death benefits—while both designs end at the same maturity value in year 5.

When simple-interest MYGAs can shine

• Interest-only income: Because interest is credited on the original premium, annual interest-only withdrawals are predictable and often higher than a rate-equivalent compound design during the term.
• Interim liquidity: If you anticipate using free withdrawals (commonly up to 10% annually), a higher interim value can translate to larger dollar withdrawals within the free amount.
• Interim death benefits: If the carrier pays account value as the death benefit during the term, higher interim values may benefit beneficiaries if death occurs before maturity.

Free-withdrawal provisions and death-benefit mechanics vary by carrier and may be affected by optional riders. Surrender charges and market value adjustments (MVA) can apply to withdrawals above the free amount.

When compound-interest MYGAs can fit

• Hold-to-maturity investors: If you don’t need interim withdrawals, compound designs may be competitive or preferable based on term, carrier, and rider choices.
• Contract/rider alignment: Some riders or liquidity features pair more efficiently with certain compound-rate products; compare net rates after rider costs.

Picking the right term (and checking current rates)

Term length has a major impact on rate and flexibility. If you’re rate-shopping, review the current MYGA landscape by term. Start with these pages to compare what’s competitive right now:

• Compare today’s best 3-year MYGA rates
• See the best 5-year annuity rates and terms
• Explore leading 7-year MYGA rates
• Review top 10-year annuity rate options
• Check competitive 4-year annuity rates
• Check competitive 6-year MYGA rates

Shopping checklist

1. Define your use case: Hold to maturity, interest-only income, or occasional free withdrawals.
2. Compare the path, not just the end: Look at interim account values for your likely usage pattern.
3. Price riders carefully: Liquidity or income riders can reduce the base crediting rate—compare the net effect.
4. Watch surrender & MVA terms: Early withdrawals above the free amount may incur charges and MVAs.
5. Confirm beneficiary mechanics: Understand how the contract pays out during the guarantee period.