What is a MYGA?
A multi-year guaranteed annuity, often called a MYGA, is a type of fixed deferred annuity. In exchange for a premium, an insurance company credits interest at a contractually guaranteed rate for a stated multi-year period. People often compare a MYGA with a certificate of deposit because both can offer a set rate for a term, but a MYGA is an insurance contract, not a bank deposit, and its access rules and protections are different.
How does a MYGA work?
You deposit money under the contract, then the insurer credits interest according to its terms during the guarantee period. Depending on the product, you may choose a term such as three, five, or more years. The guaranteed rate applies only as described in that contract; a renewal rate after the initial period may be different. A MYGA is not directly invested in the stock market, so it does not share in market gains or losses the way market-linked products can.
For a simplified illustration, $50,000 earning 4% a year with annual compounding would grow to about $60,833 after five years before taxes or any contract adjustments. This is only a math example, not a current MYGA rate, quote, or promised result. The actual credited rate, compounding method, values, and options depend on the insurer's contract.
What does the guaranteed rate mean?
The rate guarantee gives you a defined interest-crediting basis for the stated term, which can make the accumulation value more predictable than a market-based investment. It does not make every part of the contract liquid, guarantee a specific return if you withdraw early, or guarantee the insurer itself. Annuity guarantees are backed by the issuing insurer's claims-paying ability. They are not FDIC-insured bank deposits, and state guaranty association protections have limits and vary by state.
Can you withdraw money from a MYGA?
Access depends on the exact contract. Some fixed annuities allow limited withdrawals without a surrender charge after a specified time or up to a stated annual amount. Taking more than the permitted amount, making a full surrender, or transferring value before the guarantee or surrender period ends can trigger surrender charges. A market value adjustment may also apply to some contracts and can reduce the amount available. Ask for the withdrawal schedule, any free-withdrawal provision, and the surrender value for each contract year before you buy.
What happens when the MYGA term ends?
At the end of the initial guarantee period, the contract may offer choices such as taking the available value, beginning an income option, or renewing for another term. The choices and election window are contract-specific. If you do nothing, a contract may renew under its stated rules, potentially at a new rate and with a new surrender period. Check the maturity and renewal notices, deadlines, and current options well before the term ends so you can make an informed decision.
How are MYGA earnings taxed?
A nonqualified annuity generally allows earnings to grow tax-deferred until money is withdrawn or paid out; tax deferral is not the same as tax-free growth. If a MYGA is held inside a traditional IRA or another tax-deferred retirement plan, the annuity does not create an additional layer of tax deferral beyond that account. Tax treatment depends on the source of the money and how you take distributions. A taxable distribution before age 59½ may also face an additional federal tax unless an exception applies. Review the rules with a qualified tax professional before acting.
Do MYGAs have fees?
Sonon Insurance does not charge an agency fee to compare or purchase our annuity products. That does not remove the contract terms: a MYGA can impose surrender charges or an adjustment for certain early withdrawals, and optional features may have separate costs. Some fixed annuities have no explicit annual contract fee, with the economics reflected in the credited rate. Compare the rate, surrender schedule, withdrawal provisions, and any optional benefits together rather than looking at a fee label alone.
What should you compare before buying a MYGA?
Compare the guaranteed rate and length of the guarantee, the insurer's financial strength, minimum premium, contract value and surrender value, penalty-free withdrawal rules, any market value adjustment, beneficiary provisions, and the options at maturity. Also consider when you may need the money and how a fixed annuity fits with your other savings and retirement income. A MYGA may not suit money you need to keep readily available.
We can help you compare available annuity products and explain how their rates, terms, and access provisions differ. See the contract and state-specific disclosure before you decide.
Frequently asked questions
Is a MYGA the same as a CD?
No. A MYGA is a fixed deferred annuity issued by an insurance company; a CD is a bank deposit. They have different guarantees, withdrawal rules, tax treatment, and protections. A MYGA is not FDIC-insured.
Can a MYGA lose value?
The guaranteed accumulation value follows the contract terms, but an early surrender or withdrawal can be reduced by charges or an adjustment. The insurer's guarantees also depend on its ability to pay claims.
Is a MYGA a good investment for everyone?
No single annuity is right for everyone. Consider your time horizon, need for access, income goals, other assets, the issuing insurer, and the exact contract terms before deciding.
Does Sonon Insurance charge a fee for MYGAs?
Sonon Insurance does not charge an agency fee to compare or purchase our annuity products. The insurer's contract may still include surrender charges, adjustments, or costs for optional features; review the specific contract.
Helpful resources
Coverage, eligibility, and plan terms vary by carrier and state. This article is general information, not a promise of coverage or individualized financial advice.
