Guaranteed Growth.
Zero Market Risk.
A Multi-Year Guaranteed Annuity (MYGA) locks in a fixed interest rate for 2–10 years with tax-deferred growth and full principal protection. No market risk. No annual tax bills. No surprises.
MYGAs often offer 50–150+ basis points more than equivalent bank CDs — with the added benefit of tax deferral.
MYGA Terms: Short, Mid, and Long
Choose the term that matches your time horizon. Longer terms offer higher guaranteed rates.
Short-Term MYGA (2–3 Years)
Highest liquidity, shortest commitment. Ideal for money you'll need in 2–3 years but want to earn more than a savings account or money market. Rates are typically lower than longer terms.
- Lock in a rate for 2–3 years
- Lowest surrender charge schedule
- Good for short-horizon bridge funds
- 10% annual free withdrawal typically included
Mid-Term MYGA (4–6 Years)
The most popular term range — rates are meaningfully higher than short-term, with a manageable surrender period. The workhorse of the CD replacement strategy.
- Often the optimal rate-to-liquidity tradeoff
- Ideal replacement for expiring bank CDs
- Full account value to heirs at death (no probate)
- Tax-deferred accumulation — no annual 1099
Long-Term MYGA (7–10 Years)
Maximizes the guaranteed rate for clients with long time horizons and no liquidity need for the funds. Often 50–100+ basis points above shorter terms from the same carrier.
- Highest guaranteed interest rate
- Significant tax compounding advantage over time
- 1035 exchange or annuitization at maturity
- Estate planning: beneficiary designation avoids probate
Why Choose a MYGA Over a Bank CD?
For conservative savers, MYGAs offer meaningful advantages over the standard CD alternative.
Guaranteed Growth
Your rate is set at issue and fixed for the entire term — no market volatility, no resets, no surprises. You know exactly what your money will be worth at maturity before you write the check.
Tax-Deferred Accumulation
Unlike bank CDs, MYGA interest is not taxed annually. You don't receive a 1099 until you withdraw funds. Deferring tax on gains allows significantly more compounding over the same period.
No Market Exposure
A MYGA carries no equity risk, no interest rate risk from bond price changes, and no volatility. It's a contractual guarantee from an insurance company — not a market-linked product.
Rates Beat Bank CDs
Insurance company MYGAs can offer significantly higher rates than bank CDs due to their investment strategy and regulatory structure. For longer terms, the differential can be 50–150+ basis points.
How a MYGA Works — Step by Step
Select Your Term and Fund Your MYGA
Choose a 2–10 year term and fund the contract with a lump sum ($10,000+ minimum on most products). Your rate is set at issue and guaranteed for the entire term. No ongoing contributions are required or permitted.
Interest Compounds Tax-Deferred
Your guaranteed rate compounds inside the contract each year. Unlike a CD, no 1099 is issued annually — you owe no income tax on the growth until you take a distribution. The IRS defers taxation to the point of withdrawal.
Free Withdrawals Available
Most MYGAs allow a 10% free withdrawal each year without surrender charges. This provides some liquidity if needed. Withdrawals above 10% during the surrender period are subject to a declining surrender charge schedule.
Options at Maturity
When your term ends, you have a window (typically 30 days) to decide: withdraw all funds, renew into a new MYGA at the current rate, do a 1035 exchange into another annuity, or begin income payments (annuitize). No forced decision — your options are fully open.
MYGA vs. Bank CD: Side-by-Side
| Feature | MYGA | Bank CD |
|---|---|---|
| Guaranteed Rate | Fixed for entire term | Fixed for term |
| Tax Treatment | Tax-deferred — no annual 1099 | Taxed annually on interest earned |
| Typical Rate (5-yr) | Often 50–150+ bps above CD | Lower — FDIC premium and bank overhead |
| Principal Protection | State guaranty association (VA: $350K) | FDIC up to $250K per depositor |
| Early Withdrawal | 10% free/yr; surrender charge above that | Early withdrawal penalty (typically 6 months interest) |
| Death Benefit | Beneficiary designation — avoids probate | Goes through estate (probate possible) |
| Renewal Options | 1035 exchange, annuitize, withdraw, or renew | Withdraw or renew at new rate |
| Minimum Deposit | Typically $10,000–$25,000 | Varies — often $500–$1,000 |
Tax deferral compounds meaningfully: On a $200,000 deposit at 5.25% over 7 years, a CD (assuming 22% federal + 5.75% VA tax rate) nets approximately $59,000 after tax. The same funds in a MYGA defer all tax — growing to $289,000 before tax, with the timing of taxation in your control.
Tax Treatment of MYGAs
Tax-Deferred Accumulation
Interest credits inside a non-qualified MYGA do not generate a 1099 annually. Taxes are deferred until withdrawal. For clients in their peak earning years, deferral may allow funds to grow into a lower tax bracket in retirement.
LIFO Treatment on Withdrawals
Last In, First Out (LIFO) means gains are taxed first when you withdraw from a non-qualified MYGA. Original principal comes out last, income-tax-free. Plan withdrawals carefully to minimize the tax hit in any single year.
IRA and Roth IRA Compatibility
A MYGA inside a traditional IRA or Roth IRA is subject to the IRA's own tax rules. RMDs apply at age 73 for traditional IRAs. The tax-deferral advantage of the MYGA is redundant inside an IRA — but the guaranteed rate and protection remain compelling.
10% Early Withdrawal Penalty Before 59½
Like all annuities, non-qualified MYGAs are subject to a 10% IRS early withdrawal penalty on gains withdrawn before age 59½ — in addition to ordinary income tax. Plan your term accordingly if you may need funds before that age.
Client Case Studies
Illustrative scenarios showing how MYGAs solve real client problems.
Retiree Replacing a Maturing CD Ladder
Retired nurse, age 67, $320,000 in bank CDs maturing at 4.5%
Situation
Three CDs totaling $320,000 were maturing. Renewal rates at her bank were 3.8%. She didn't need the money for 5+ years and was frustrated by annual 1099s on CD interest pushing up her Medicare IRMAA surcharges.
Solution
Placed $300,000 into a 5-year MYGA at 5.40% guaranteed. Result: higher rate, no annual 1099, and IRMAA surcharge eliminated for the 5-year period while funds remain in the MYGA.
Key Results
Frequently Asked Questions
Ready to see current MYGA rates and find the right term for your situation?
Lock In a Guaranteed Rate Before Rates Change
Rates reset frequently. The right time to lock in a MYGA is when rates are attractive — not after they've moved. Let's find the right term and carrier for your situation.