A set rate for a set term
A multi-year guaranteed annuity, commonly called a MYGA, is a fixed annuity with an interest rate guaranteed for a stated term. Common terms vary by insurer and market conditions. The contract explains what happens at the end of the guarantee period.
Why people compare MYGAs and CDs
Both can provide a predictable rate for a period of time, but they are different products. A MYGA is an insurance contract and is not FDIC insured. Interest generally grows tax-deferred until withdrawn. A bank CD is a deposit product and may qualify for FDIC insurance within applicable limits.
Trade-offs to review
MYGAs typically include surrender charges and limits on penalty-free withdrawals. Taking money out early may reduce the benefit of the guaranteed term and can create tax consequences. Renewal rates after the initial term may differ.
Questions to ask
- What exact rate and term are guaranteed?
- When does the surrender period end?
- What penalty-free withdrawals are allowed?
- What happens at maturity if no election is made?
- Is a market value adjustment part of the contract?
- What is the insurer's financial-strength rating?
Do not compare headline rates alone. Liquidity, renewal provisions, insurer strength, and the intended use of the money matter too.