Understanding Multi-Year Guaranteed Annuities (MYGAs)
If you’re looking for a safe, predictable way to grow your retirement savings without the volatility of the stock market, understanding Multi-Year Guaranteed Annuities (MYGAs) might be the answer. These fixed annuities lock in a guaranteed interest rate for a specific number of years—typically between 2 and 10—offering stable, tax-deferred growth. Unlike CDs, which are taxed annually, MYGAs allow your interest to compound until you withdraw it.
MYGAs are especially appealing to individuals nearing retirement who want to preserve capital while earning a competitive rate. Many contracts offer higher yields than bank certificates of deposit and come with flexible surrender terms, giving you options for liquidity if needed. You can ladder them like CDs for different maturity dates or use them to cover known expenses down the road.
They’re also a great solution for people sitting on idle cash in a savings account, checking account, or brokerage money market—offering better returns without taking on additional risk. And because MYGAs are issued by insurance companies, they’re backed by the financial strength of the carrier, making them a dependable part of a diversified retirement strategy.
At Diversified Insurance Brokers, we help clients compare MYGA rates from over 75 top-rated insurance carriers.We’ll guide you toward the best term and rate based on your goals, liquidity needs, and timeline.
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FAQs: Understanding Multi-Year Guaranteed Annuities (MYGAs)
What is a Multi-Year Guaranteed Annuity (MYGA)?
A Multi-Year Guaranteed Annuity, or MYGA, is a type of fixed annuity that guarantees a specific interest rate for a set term, typically 2 to 10 years. Your principal is protected, and the credited interest will not fluctuate with the stock market.
How does a MYGA differ from a traditional fixed annuity?
Both are fixed annuities with principal protection, but a MYGA locks in a guaranteed interest rate for a multi-year period, similar to a CD. Traditional fixed annuities may have rates that can change after an initial guarantee period based on the insurer’s renewal rate decisions.
What terms are available for MYGAs?
Common MYGA terms range from 2 to 10 years. Many retirees choose 3-, 5-, or 7-year options depending on their time horizon, interest rate outlook, and retirement income strategy.
Is my principal guaranteed in a MYGA?
Yes. MYGAs are fixed annuities issued by insurance companies, and they guarantee your principal as long as you follow the contract terms and avoid early withdrawals above penalty-free limits.
How are MYGAs taxed?
Interest grows tax-deferred. You do not pay taxes on gains until you withdraw funds. When money is taken out, gains are typically taxed as ordinary income. Tax rules can differ for qualified (IRA) vs non-qualified funds.
Can I access my money during the MYGA term?
Most MYGAs allow limited penalty-free withdrawals each year, such as 10% of the account value, but larger withdrawals may trigger surrender charges and possible tax penalties if taken before age 59½.
What happens when the MYGA term ends?
At the end of the term, you usually have options: renew into a new guarantee period, transfer to another annuity, move funds to another account, or begin an income payout. If you do nothing, the contract may roll into a renewal period, so it’s important to review your options before maturity.
Are MYGAs safer than market-based investments?
MYGAs are not tied to stock market performance and provide guaranteed interest and principal protection, which can make them less volatile than market-based investments. However, they do not offer the same upside potential as equities.
Can MYGAs be used for retirement income?
Yes. MYGAs are often used as a safe accumulation tool before retirement income begins. At the end of the term, you can annuitize, transfer to an income-focused annuity, or draw systematic withdrawals as part of your retirement plan.
Who is a good candidate for a MYGA?
MYGAs can be a good fit for conservative savers who want predictable growth, principal protection, and tax-deferred interest, and who can leave funds in place for the duration of the guarantee period.
About the Author:
Jason Stolz, CLTC, CRPC, is a senior insurance and retirement professional with more than two decades of real-world experience helping individuals, families, and business owners protect their income, assets, and long-term financial stability. As a long-time partner of the nationally licensed independent agency Diversified Insurance Brokers, Jason provides trusted guidance across multiple specialties—including fixed and indexed annuities, long-term care planning, personal and business disability insurance, life insurance solutions, and short-term health coverage. Diversified Insurance Brokers maintains active contracts with over 100 highly rated insurance carriers, ensuring clients have access to a broad and competitive marketplace.
His practical, education-first approach has earned recognition in publications such as VoyageATL, highlighting his commitment to financial clarity and client-focused planning. Drawing on deep product knowledge and years of hands-on field experience, Jason helps clients evaluate carriers, compare strategies, and build retirement and protection plans that are both secure and cost-efficient.
