What is a Multi-Year Guaranteed Annuity (MYGA)?
A Multi-Year Guaranteed Annuity (MYGA) is a type of fixed annuity that provides a guaranteed interest rate over a set number of years, commonly ranging from 3 to 10 years. During the chosen term, the annuity holder’s principal grows at a predetermined rate, making MYGAs a low-risk investment option for individuals seeking steady, predictable returns. At the end of the term, the annuity holder can choose to renew the MYGA, withdraw the funds, or convert it into a lifetime income stream.
MYGAs are popular for conservative investors looking for safe alternatives to bank certificates of deposit (CDs), as they typically offer higher interest rates with similar levels of stability. The interest earned in an MYGA grows tax-deferred, meaning that taxes are not due until withdrawals are made, allowing the investment to compound more effectively over time.
One of the key features of a MYGA is the guaranteed rate, which remains unaffected by market fluctuations. However, early withdrawals from a MYGA may incur penalties or surrender charges, and any withdrawals before age 59½ are subject to a 10% IRS tax penalty.
A MYGA can be an effective part of a diversified retirement portfolio, providing stable growth while protecting against market volatility, especially for those nearing or in retirement.