Guaranteed-Rate Annuity (MYGA)

What a MYGA is

A multi-year guaranteed annuity is a type of fixed annuity: an insurance contract that can provide a stated interest rate for a defined term, commonly three to ten years. Guarantees apply only as described in the contract and depend on the issuing insurer’s claims-paying ability.

Guarantees apply only as described in the issued contract and depend on the claims-paying ability of the issuing insurer. Annuities are not bank deposits, are not FDIC or NCUA insured, and are not guaranteed by any federal government agency.

Comparing a MYGA with a CD

Both instruments state a rate for a term, but they are different products with different protections. A fair comparison uses the same date and the same basis for both.

• Bank CDs may receive FDIC insurance within applicable limits. MYGAs are not FDIC-insured.
• A MYGA guarantee depends on the issuing insurer’s claims-paying ability.
• Early-withdrawal consequences differ: a CD typically charges an interest penalty, while a MYGA can apply a declining surrender charge and, where applicable, a market value adjustment. Those can be more significant.
• CD interest is generally taxable each year; MYGA interest is generally tax-deferred until withdrawn. Tax deferral is not tax elimination.
• Rates and terms change, so both should be compared on the same date and on the same basis.

What to check before committing

• How long the funds can comfortably stay in place.
• The insurer’s current financial-strength rating, and the date of that rating.
• How interest will eventually be taxed, and at what rate.
• What happens at the end of the term — renewal rates, windows, and defaults.

The applicable rate is established under the issuing carrier’s contract and issue process and may change before the contract is issued. A consumer does not receive a rate until a contract is issued.

Further reading

• Read how fixed annuities work
• Understand surrender periods

Agency, compensation and licensing disclosures