MYGA or Multi-Year Guaranteed Annuity.

MYGA is short for a Multi-Year Guaranteed Annuity, a fixed annuity with a guaranteed rate for a specific period. It’s a good option for those of you who are interested in financial planning ahead of retirement and tax-deferred growth.

To determine if this annuity product is suitable for you and your financial situation, you should get a broader understanding of it.

We’ve explained Multi-Year Guarantee Annuities below, as well as any other terms that are necessary for you to know. After reading, you’ll be able to make an informed decision.

So, let’s begin!

What Is An MYGA?

An MYGA, which stands for “Multi-Year Guarantee Annuity,” is an insurance product that has a guaranteed rate and tax-deferral benefits, as long as you purchase it by using your regular funds. So, not those that are coming from saving accounts that already have income tax advantages, such as IRAs. The fixed interest rate is offered for a certain period (e.g., 2, 5, or 10 years).

In other words, you can make use of this type of annuities for retirement planning and a guarantee of your investment return.

You’ll find that some people refer to MYGAs as “CD-type annuities,” but this is just because they share some features, such as the guaranteed fixed rate and the time horizon for the investment.

CDs (Certificate of Deposits) are accounts sold by banks and differ from the annuities that are insurance products. Also, note that annuities differ from pension retirement plans.

How Does An MYGA Work?

To purchase an MYGA, you’ll need to sign a contract with an insurance company – typically, a life insurance company – in which you will determine all the details about your annuity.

What follows is that you will make regular payments (your premium) to the insurer in exchange for guaranteed interest rates on the contribution for the contracted term, also known as the surrender period. This term is usually 2, 3, or even ten years.

Over the specified period, the MYGA accumulates a lump sum of money based on the negotiated guaranteed interest rate for the entire duration of the MYGA term. It grows with no tax on the earned interest, meaning that you have the tax deferral benefit.

At the end of this term, you can receive the premium and the interest earned. Alternatively, you can choose to renew the annuity contract, but the interest rate may differ from the one you had previously.

If you want to withdraw money before the specified term is over, you may incur fees that are called surrender charges. Sometimes, you might be able to withdraw tax-penalty-free partial withdrawals. Whether there will be fees and how high they are will depend on the insurance provider.

You can also use an MYGA to supplement your other investment accounts or Social Security benefits.

MYGA – Benefits

MYGAs offer a potentially safer way to reach your financial goals because they are not subject to market volatility like some other kinds of investment. The interest rate is fixed and guarantees steady growth. Many people choose to make use of the MYGA as part of their retirement plan.

But if you are a younger investor, you can check out other types of annuities we’ve explained below.

Besides, Multi-Year Guaranteed annuities grow tax-deferred, which means you don’t owe taxes until the money is taken out.

Some annuity holders may have to pay fees if they want to withdraw the money earlier, but most of the time, MYGAs are flexible and allow for partial withdrawals yearly up to 10% of funds without a tax penalty.

Find The Cheapest MYGA Quotes With The Best Interest Rate

It’s important to do your research because different insurance companies will set different rates for your Multi-Year Guarantee Annuity.

So, how do you find one that offers higher rates?

We allow you to do your comparison shopping in a straightforward way:

Fill in our form and tell us some info about yourself – it won’t take you longer than a minute – and we will generate MYGA quotes from multiple insurance companies we are partnered with right now. They include over 30 carriers with an array of offers for you.

The whole process is free, instant, and online! You only need to use our annuity calculator to get started.

We can also find you multiple opportunities to score a discount if you decide to continue your annuity shopping.

You are not sure if this type of fixed annuity is the best for you?

Talk to a qualified professional at Insurance Geek today, and we’ll help you determine what’s the best multi year guaranteed annuity solution for your particular case.

A Word On Other Types Of Annuities

Some other types of annuities might be a better option for you. You can check different kinds below:

  • A traditional fixed annuity. Multi-Year Guaranteed annuities are structured the same as a traditional fixed annuity, meaning that traditional fixed annuities also grow tax-deferred and with a fixed rate. However, they can last longer – until retirement, or even for the remainder of your lifetime – whereas MYGAs are limited to a certain number of years.
  • Variable annuity. This type of annuity depends on the elements, e.g., the performance of the underlying investment options and market volatility. As such, it comes with a higher risk, but it can also result in a high return.
  • Fixed indexed annuity. A fixed indexed annuity, or FIA, is somewhere in-between the abovementioned types because the return is tied to how the market performs (i.e., the changes in a market index), but you have a guarantee that the annuity won’t lose value due to a minimum “floor” (usually between 0%-2%).
  • Single-premium immediate annuity. A single-premium immediate annuity, or SPIA, differs from the other types. This annuity is typically funded with a large lump sum of money, and you can arrange subsequent payments that can increase annually.

MYGA (Multy Year Guaranteed Annuity) – FAQ

Q: How does the MYGA differ from fixed annuities?

A: A MYGA is actually a type of fixed annuities. The main difference between MYGAs and traditional fixed annuities is the duration of the contractually guaranteed interest rate. MYGAs only guarantee the rate for a pre-determined number of years – either short-term, like two years, or even up to 20 years.

Q: Do you pay income tax with MYGA?

A: Whether you pay taxes will depend on your contract. Simply put, if you purchase a qualified MYGA (i.e., one that has qualified funds, or an already tax-advantaged account – through an IRA, 401 (k) plan, etc.), you pay the said income tax both on the interest and on the principal when you withdraw your money. On the other hand, if you purchase it with non-qualified funds, you will pay taxes only on the interest once you withdraw the money.

Q: What insurance company has the best MYGA rates?

A: As MYGA rates significantly vary among different insurers, you can use Insurance Geek’s MYGA quote calculator to compare offers from multiple carriers and see which one has the best deal for you.

Q: How do MYGAs differ from CDs?

A: A CD (Certificate of Deposit) is issued by a bank, whereas an MYGA is an annuity insurance product. Although both options protect you from loss with a fixed interest rate, annuity and CD rates may significantly vary. Being a bank product, a CD is FDIC-insured (Federal Deposit Insurance Corporation), whereas an annuity is backed by the State Guaranty Funds and issuing insurance carrier. With an MYGA, you will usually be able to withdraw up to 10% of the initial investment annually or make a partial withdrawal, which isn’t possible with CDs. A CD requires you to cash out the whole sum of money, or you could face high surrender charges.

Final Words: MYGA Made Easy

Now that you have a full understanding of what a Multi-Year Guarantee Annuity is, you can decide whether it should be a part of your financial plan.

We can help you find the right insurer if you use our MYGA rates calculator.

For any additional questions, please feel free to reach out to Insurance Geek today!