Planning for retirement can feel like managing a dozen moving parts at once. Markets change, interest rates vary, expenses evolve, and timelines shift. A multi-year guaranteed annuity (MYGA) helps bring structure to at least one part of the plan, providing a defined path for growth over a set number of years.
For people who value simplicity, that clear framework can be appealing. When you purchase a MYGA, you know the fixed, guaranteed interest rate you’ll earn, how long the guarantee period will last, and when the initial term will end. Interest compounds tax-deferred* over time, which means earnings can continue to grow.
Although MYGAs are relatively straightforward, choosing one still involves important decisions about term length, access to money, and what happens when the guarantee period ends. Understanding how those pieces work can help potential buyers decide whether a MYGA fits their retirement goals and financial timeline.
In simplest terms, a multi-year guaranteed annuity is a financial product designed to help grow a lump sum of money over a set period of time, typically at rates that are more competitive than those offered by traditional bank products such as high-yield savings accounts and certificates of deposit (CDs).
The money placed in the annuity contract earns interest at a rate that is guaranteed for the selected period. Income taxes on that growth are generally deferred until money is withdrawn.
The term “multi-year” refers to the length of the guarantee period, typically between two and 10 years. The rate does not change during the selected period.
A MYGA is also a deferred annuity, meaning it is designed primarily to accumulate value before withdrawals or income payments begin.
When you purchase a MYGA, you place a lump sum into the contract and choose from the available guarantee periods. Once the contract begins, interest is credited at the guaranteed rate and added to the contract value. Future interest is then earned on the larger balance, allowing growth to compound over time.
Because access is more limited than it is with a savings account, choosing the right term means considering both how long the money can remain in the contract and how much liquidity may be needed along the way.
Most MYGAs also include a surrender charge period. During that time, the contract may allow specified penalty-free withdrawals each year without a surrender charge. Withdrawals above that amount may result in surrender charges or other adjustments.
The end of a MYGA’s guarantee period creates a natural opportunity to decide what the money should do next. By that point, the contract has completed its defined growth period, and the owner can evaluate the accumulated value against their current goals.
Depending on the contract, options may include renewing for another guarantee period, withdrawing some or all of the money, moving the funds to another annuity, or choosing an available income option.
Financial plans, income needs, and interest rates may have changed since the MYGA was originally purchased. Reviewing the available choices before the term ends allows the contract owner to put the money to work in a way that reflects their overall financial goals.
People choose MYGAs for many reasons. Some are preparing for retirement, while others may have received an inheritance, sold an asset, accumulated substantial savings, or reached the end of another fixed-term financial product. In each case, the goal may be similar: allow a lump sum to grow over several years with minimal oversight.
A MYGA can be used to:
MYGAs are a fixed annuity, meaning the rate is set. They are often compared with other fixed accounts such as certificates of deposit (CDs), high-yield savings accounts, and money market accounts because all can provide a relatively stable place for money to grow. The key differences come down to how long the rate lasts, how the growth is taxed, and how easily the money can be accessed.
CDs: CDs and MYGAs both offer a fixed interest rate for a set period. Interest earned in a CD is generally taxable each year, while interest in a MYGA grows tax-deferred until it is withdrawn. CDs are bank products and may be eligible for FDIC insurance, while MYGA guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.
High-yield savings accounts and money market accounts: These accounts usually provide easier access to money, making them useful for emergency funds and shorter-term needs. Their interest rates can change at any time, however, so future growth is less defined. A MYGA locks in a rate for the selected guarantee period but places more limits on withdrawals.
|
Feature |
MYGA |
CD |
High-Yield Savings Account |
Money Market Account |
|
Fixed rate for a set term |
Yes |
Yes |
No |
No |
|
Tax-deferred growth |
Yes |
No |
No |
No |
|
Access to money |
Limited during surrender period |
Often limited during CD term |
Yes |
Yes |
|
Typical minimum balance |
Generally higher |
May vary |
Often low or none |
Often higher than a savings account |
|
Future income stream options |
Yes |
No |
No |
No |
|
Best suited for |
A lump sum that can remain in place for several years |
Shorter-term savings goals |
Emergency funds or near-term needs |
Larger cash balances that may need to be accessed |
Ultimately, the right choice depends on what the money needs to do. For money that can remain in place for several years, a MYGA may offer advantages including tax-deferred growth, a rate guaranteed for the full term, and future income options.
A MYGA may be worth considering for someone who has a lump sum they don’t expect to need immediately, yes still want growth potential for that money. That could include people who are:
A MYGA is generally better suited for money with a longer time horizon than for emergency savings or funds that may be needed unexpectedly. Before purchasing one, potential buyers should consider when they may need access to the money and how the contract fits alongside their other savings and investments.
Like any financial product, a MYGA offers benefits as well as tradeoffs. Understanding both can help potential buyers decide whether it fits their goals and timeline.
A MYGA can be a straightforward way to grow a lump sum over a defined period, but the right choice depends on how long the money can remain in the contract, how much access may be needed, and what the owner wants the money to accomplish.
Axonic Insurance (AXI) offers both MYGAs and FIAs designed to support different financial goals. Whether you prefer the defined growth of a MYGA or the index-linked growth potential of a FIA, a financial professional can help you compare the options available from AXI and determine which approach may be right for you.
Yes. Many MYGAs allow a specified amount to be withdrawn each year without a surrender charge. Withdrawals above that limit may be subject to surrender charges or other adjustments, depending on the contract.
Depending on the contract, the owner may be able to renew for another guarantee period, withdraw some or all of the contract value, move the money to another annuity, or select an available guaranteed income option. The rate offered for a new guarantee period may be different from the original rate.
Interest earned in a MYGA generally grows tax-deferred, meaning you don't pay taxes until money is withdrawn. The tax treatment of withdrawals can depend on how the annuity was purchased and other individual circumstances.
Both offer a fixed rate for a set period, but MYGA earnings generally grow tax-deferred, while CD interest is typically taxable as it is earned. MYGAs may also offer future income options, while CDs generally provide greater simplicity for shorter-term savings goals.
Most MYGAs are funded with a single lump-sum payment and do not allow additional contributions after the contract begins. Someone who wants to invest more money later may need to purchase a separate contract, depending on the product.
*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.
Guarantees are based on the financial strength and claims-paying ability of the issuing insurance company.
Annuities are designed for long-term accumulation of money; surrender charges, adjustments and fees may apply on early withdrawals. Annuity withdrawals are subject to income tax, and withdrawals prior to age 59½ may also be subject to an IRS penalty.
A Multi-Year Guaranteed Annuity (MYGA) is not a certificate of deposit (CD), is not issued by a bank, and is not insured by the FDIC or any other federal government agency.
Information related to tax or estate planning is not intended as tax or legal advice. A tax professional or attorney should be consulted for specific guidance. 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.
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