A Multi-year Guaranteed Annuity annuity may help you meet your retirement savings goals if:

  • Entering a New Life Stage – Are you getting close to, or are you in retirement and seeking competitive interest rates without market risk?
  • Looking for Better Rates – Are you seeking higher rates than many money markets or bank certificates of deposits (CDs) currently offer
  • Need Steady Income During Retirement – Are you looking for guaranteed return rates over a four year or longer period
  • Desire a Low-Risk Savings Option – Do you want a simple retirement savings option that doesn’t put your principal at risk?
  • Have you Maxed Out Retirement Contributions – You have not retired and regularly max out your 401(k) or IRA Contributions?

What is a multi-year guaranteed annuity, or MYGA?

A multi-year guaranteed annuity, or MYGA, is an insurance product that provides guaranteed interest rates for a set period of time. These contracts are typically funded with a single premium payment. The insurer will credit interest to your contract’s value from the date of issue until the end of the guarantee period. They are long-term products and early withdrawals may be subject to a surrender charge and market value adjustment.

What is the difference between a MYGA and other fixed interest-type products?

There are a number of important differences between MYGAs and other fixed-interest types of products. Various types of financial products may make sense for your needs and this is not intended to be a comprehensive comparison. What’s important to understand about MYGAs is that they are insurance products issued by an insurance carrier. Their guarantees are backed by the financial strength and claims-paying ability of the issuing company. They are not FDIC insured. Fully review product details before making a purchasing decision.

Who is responsible for the guarantees?

The issuing insurance carrier is responsible for the guarantees. Guarantees are backed by the financial strength and claims-paying ability of the issuing carrier.

What is the least amount of money I need to buy a MYGA?

Multi-year guaranteed annuities have a minimum requirement as low as $2,500 up to a maximum of $1 million.

Should I put all of my money in a MYGA?

No! While a MYGA offers competitive interest rates, any premium placed in a MYGA will be subject to surrender charges that decline over time and possibly a market value adjustment. Carefully consider your liquidity needs before purchasing a multi-year guaranteed annuity.

What penalties will I pay if I surrender my entire policy early?

However, withdrawals above any free withdrawal amount including withdrawals of the entire contract value, a.k.a. “surrendering” your contract are generally subject to a surrender charge and market value adjustment. Free withdrawal amounts vary by product. Keep in mind that any withdrawals will reduce the contract value. Additionally, withdrawals are taxed as ordinary income and, if taken prior to age 59 1/2, a 10% federal tax penalty may also apply. Before making a purchase decision, it’s important for you to speak with a financial and tax professional to understand exactly how surrender charges, market value adjustments and taxes apply to you specific annuity contract.

Fixed Annuities Vs CDs

Both vehicles offer a safe way to save money, crediting higher interest rates than available through savings accounts by requiring you to “lock” your money away for a period of time. However, fixed annuities are insurance products, so guarantees and payments are based on the claims paying ability of the insurance company. Here is a comparison of some of the key features of annuities and CDs:

Fixed AnnuityCD
Sold byInsurance CompaniesCD
Size$2,500 – $1,000,000Virtually any denomination
Term3-10 years, but may vary by carrier and product3-months – 10 years, but may vary by bank
Interest RatesVary by term and size but
typically higher than CD Rates
Vary by term and size but typically
lower than fixed annuity rates
TaxesIn general, contract growth is tax-deferredIn general, interest is taxable annually as earned
LiquidityYou may be allowed to withdraw a
portion of the premium annually without penalty
Any amount withdrawn is generally subject to penalty
Withdrawal ProvisionsA surrender charge and market value adjustment typically apply to any withdrawals above the free withdrawal amountAll withdrawals are charged, typically equal to a set number of days of interest
FDIC InsuredNoEach depositor is insured by the FDIC up to at least $250,000

This is a general comparison for illustrative purposes only. It is not intended as financial or tax advice. You should carefully consider your options and consult with a financial and tax professional for help determining which product is best for you. Actual detains may vary depending on the insurance company, bank and/or product.

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Learn more about multi-year guaranteed annuities (MYGAs)