Multi-Year Guaranteed Annuity (MYGA)
A Multi-Year Guaranteed Annuity (MYGA) is a type of fixed annuity designed to help you grow part of your retirement savings safely and predictably. With a MYGA, you invest a lump sum with an insurance company and lock in a guaranteed interest rate for a specific number of years. Your principal is protected from market ups and downs, and your earnings grow tax-deferred until you take withdrawals.
How MYGAs Work
When you purchase a MYGA, you agree to leave your money with the insurance company for a set period, often three to ten years, known as the guarantee period. During this time, your funds earn interest at a fixed rate that won’t change, no matter what happens in the stock market. At the end of your chosen term, you can typically:
- Renew the annuity with the same or a new contract
- Take your funds out
- Convert the contract to generate future income
- This combination of guaranteed growth and fixed timing makes MYGAs attractive for retirement savers who want predictability and principal protection.
Key Benefits
Predictable Growth
Because the interest rate is fixed for the entire guarantee period, a MYGA provides dependable, easy-to-understand growth that isn’t tied to market performance.
Tax-Deferred Growth
Earnings inside a MYGA grow tax-deferred, which means you don’t pay taxes on interest until you begin taking distributions. This can enhance compounding over time.
Principal Protection
With most MYGAs, your original investment is protected from market losses. What you put in won’t decline due to market volatility.
Potential for Higher Rates than CDs
MYGAs often offer interest rates that exceed those of traditional bank certificates of deposit (CDs) for similar time frames, making them a compelling option for conservative savers.
Is a MYGA Right for You?
MYGAs can be a strong addition to a retirement plan for individuals who:
- Want stable, predictable growth without market risk
- Are nearing retirement and seeking safety for a portion of their savings
- Prefer higher guaranteed rates than short-term bank products might offer
However, they may be less suitable for younger investors focused on maximizing long-term growth or those who may need access to funds during the term.