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CD interest is generally taxable each year; MYGA interest is generally tax-deferred until withdrawn.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.

MYGAs

What a MYGA is

Comparing a MYGA with a CD

What to check before committing

Further reading