College Savings Strategies: Using a Multi-Year Guaranteed Annuity (MYGA)  to Add Stability to 529 Plans

For many families, a 529 plan is a common way to save for future education expenses. These tax-advantaged* accounts can provide long-term growth potential, but the amount available when college begins generally depends on market performance.

For families looking for greater predictability, a multi-year guaranteed annuity (MYGA) can offer another way to help prepare for future college costs. A MYGA provides a guaranteed interest rate for a set period of time, making it possible to know how a portion of college savings will grow and when those funds will become available.

A MYGA can help balance growth potential with greater certainty around future tuition needs, and can complement a 529 plan or other college savings strategy.

What Is a 529 Plan?

A 529 plan is a tax-advantaged savings account designed to help families prepare for future education expenses. Funds can be used for qualified education costs, including college tuition and certain other eligible expenses.

Most 529 education savings plans offer a range of investment options. Many also offer age-based portfolios that gradually shift toward more conservative investments as the beneficiary gets closer to college. This can help reduce exposure to market volatility as the time to begin using the money approaches.

Because 529 plans are generally investment-based, account values can still be affected by market performance, even as portfolios become more conservative. For families approaching college, that uncertainty can make it harder to know exactly how much money will be available when tuition bills arrive. A MYGA can help address that gap by adding a more predictable source of future funding alongside a 529 plan.

How a Multi-Year Guaranteed Annuity Can Complement a 529 Plan

A MYGA provides a guaranteed interest rate over a defined period, along with tax-deferred** growth and protection from market volatility. Because the rate and maturity date are known in advance, a MYGA can help families plan for a portion of future college expenses with greater predictability.

A MYGA can also provide flexibility if education plans change. Unlike a 529 plan, which is designed specifically for qualified education expenses, money from a MYGA is not restricted to education. If a student receives a scholarship, qualifies for military education benefits, chooses a less expensive school, or decides to take a different path, the funds can be used for other financial needs.

A MYGA does not replace a 529 plan, and it cannot be held within one. Instead, the two can work alongside each other as part of a broader college funding strategy.

How a MYGA Can Support College Funding

MYGAs can be incorporated into education funding strategies in several ways, depending on a family’s college timeline, comfort with market risk, and anticipated tuition needs.

The following examples illustrate how a MYGA can play different roles in a college funding strategy:

Match a MYGA to the College Timeline

Because MYGAs have defined terms, families can choose a maturity date that lines up with when college expenses are expected to begin. For example, a 10-year MYGA purchased when a child is eight could mature around the time the child turns 18, providing access to the principal and accumulated interest when college begins.

Plan for Multiple Years of College Expenses

Families can also use multiple MYGAs with different maturity dates to help provide funds at different points during the college years. This approach, sometimes called ‘laddering,’ can be useful when expenses will be spread over several years or when a family is mapping out education costs for more than one child.

Add More Predictability as College Approaches

As college gets closer, some families may become less comfortable relying on market performance for money they expect to need soon. A MYGA can provide a guaranteed rate of growth for a portion of those savings while protecting the contract value from market downturns.

Who Might Consider Using a MYGA for College Funding?

A MYGA may be worth considering for families who want to add more certainty to a portion of their college savings strategy, particularly when they have a clear idea of when the money will be needed.

This approach may appeal to:

• Parents or grandparents who already use a 529 plan but want a more predictable source of funds alongside it.
• Families with several years before college who can match a MYGA term to their expected tuition timeline.
• Families who want to reduce exposure to market fluctuations for money intended for future college expenses.
• Families planning for multiple years of tuition or more than one student.

Because MYGAs are designed to be held for a set period, they are generally better suited for money that is not expected to be needed before the contract term ends.

Pros and Cons of Using a MYGA for College Funding

Like any financial product, a MYGA comes with both advantages and trade-offs. Understanding how those factors fit with a family’s timeline, liquidity needs, and broader college funding strategy can help determine whether a MYGA may be appropriate.

Potential Advantages

A MYGA can offer several potential advantages as part of a college funding strategy:

• A guaranteed interest rate for a defined period
• Protection from market downturns
• A known maturity date that can be aligned with future college expenses
• Tax-deferred growth
• Greater flexibility if education plans change, since MYGA funds are not restricted to qualified education expenses

Potential Trade-Offs

MYGAs are designed for longer-term savings, so they may not be appropriate for money that could be needed unexpectedly. Important trade-offs include:

• Surrender charges may apply to withdrawals made before the end of the contract term.
• Interest is generally taxable when withdrawn, and taxable distributions before age 59½ may be subject to an additional federal tax.
• A MYGA does not receive the same tax treatment as qualified withdrawals from a 529 plan.
• Guaranteed growth may offer less upside than market-based investments during strong market periods.

Could a MYGA Fit Your College Funding Strategy?

College funding often involves balancing growth potential with the need for greater certainty as tuition approaches. Rather than replacing a 529 plan, a MYGA can serve as a complementary tool within a broader education funding strategy, particularly when future tuition timing and predictability become a greater priority.

Axonic Insurance offers Multi-Year Guaranteed Annuities (MYGAs) designed to provide predictable, tax-deferred growth over a set period of time. For families looking to add stability alongside a 529 plan or other college savings, a financial professional can help determine whether a MYGA may fit their timeline and broader financial goals.

Frequently Asked Questions about MYGAs and 529 Plans

Can a MYGA be used with a 529 plan?

Yes. A MYGA and a 529 plan can be used together as part of a broader college funding strategy, with a MYGA providing a guaranteed rate and defined maturity date. However, the MYGA is managed separately from the 529 plan.

Is a MYGA a replacement for a 529 plan?

No. The two serve different purposes. A 529 plan is specifically designed for education savings and offers tax advantages when funds are used for qualified education expenses. A MYGA provides guaranteed, tax-deferred growth over a defined period and may help add predictability to a broader college funding strategy.

How are MYGA withdrawals taxed when used for college?

Withdrawals from a 529 plan are generally federal income tax-free when used for qualified education expenses. MYGA funds do not receive the same tax treatment, even if used for college. Interest earned in a MYGA is generally taxable when distributed. In addition, if a taxable distribution is taken before the MYGA owner reaches age 59½, the taxable portion may be subject to an additional 10% federal tax unless an exception applies.

When should a MYGA mature for college funding?

Ideally, the MYGA term should align with when the money is expected to be needed. For example, a MYGA purchased when a child is several years from college could be selected to mature around the time tuition expenses begin.

*Tax-advantaged refers to the favorable tax treatment available to 529 plans, if available in applicable states. Earnings generally grow free from federal income tax, and withdrawals are generally federal income tax-free when used for qualified education expenses; otherwise, taxes and a 10% federal penalty on earnings may apply.

**Tax-deferred means taxes are not paid on interest earned until the money is withdrawn.

Disclosures:

This material is for informational or educational purposes only and not intended to provide legal, tax or investment advice. A tax professional or attorney should be consulted for specific guidance.

Any examples are hypothetical and do not represent the results of any specific individual or account. Actual results will vary based on individual circumstances, tax laws, and other factors. Individual results will vary, and clients should consult a tax professional.

Axonic Insurance refers to a group of affiliated legal entities organized under Axonic Insurance Holdings Inc. that collectively specialize in designing, distributing, and servicing annuity and other investment products for individuals and institutions worldwide. Axonic Insurance Services LLC ("Axonic"), an insurance producer licensed in all fifty states and the District of Columbia, #3003019286 in Arkansas, and #6013523 in California, acts as a business process outsourcer, including for the US-issued annuities underwritten by its non-affiliated carrier, AmFirst Insurance Company (NAIC #6025), an Oklahoma domiciled life insurance company with a home office in Oklahoma City, Oklahoma ("AmFirst"). AmFirst operates as AmFirst Life Insurance Company in California. AmFirst is licensed in 47 states, the District of Columbia, Puerto Rico, and the British Virgin Islands. Axonic Services LLC, a Puerto Rico limited liability company for profit, services the non US-issued annuities underwritten by its affiliated underwriter, Axonic Insurance Company SPC, a Class B(iii) insurer in the Cayman Islands licensed under the Cayman Islands Insurance Act, 2010 (as amended), as well as its non-affiliated carrier, AmFirst Life Insurance Company I.I., a corporation licensed as a Class 5 International Insurer and Segregated Assets Plan Company under Chapter 61 of the Insurance Code of Puerto Rico. Axonic has ownership interests in segregated accounts of ALIC, which provide reinsurance coverage to AmFirst and other third-party insurers.

AXI.0826-9073141.1