Would you prefer to watch a video on this topic? Watch It Here.
A Multi-Year Guaranteed Annuity (MYGA) is a hybrid of a fixed annuity and CD. The MYGA guarantees a fixed rate for the entire duration of the contracts terms, typically from 2 to 10 years. Current rates range from 3.00%-4.20%, depending on the length of the contract and insurance company.
10 Year - 9 Year - 8 Year - 7 Year - 6 Year - 5 Year - 4 Year - 3 Year
The key distinction between a MYGA and deferred fixed annuities is the terms of the guaranteed rate. A MYGA annuity's rate is guaranteed for the full contract term. Deferred Fixed annuities offer a similar (often slightly higher) guaranteed rate, however that rate could change, up or down, sometime after the first year.
Example:
An 8 year, 4% fixed annuity might guarantee this rate for only the first 3 years. An 8 year, 3.8% MYGA annuity guarantees its rate for the full 8 years.
The MYGA annuity offers many of the same features as a typical CD. Difference number one is that CDs are issued by banks/brokers while MYGA annuities are issued by insurance companies. This means that CDs are insured by the FDIC up to $100,000 for non-retirement accounts. Annuities are not FDIC insured, but are safeguarded by individual state reserves. Annuity coverage varies state-to-state, ranging from $100,000 to $300,000.
A second difference is that MYGA annuities can be rolled over without triggering a tax-event. Using what's known as a 1035 exchange, the MYGA annuity owner can transfer money from one annuity to another without showing an income. This is not possible with CDs, which generate income statements every year.
A third difference is that you can make partial withdrawals from a MYGA annuity. Unlike a CD, a typical MYGA annuity will allow you to withdrawal up to 10% of the initial investment annually. This feature is very desirable because it covers unexpected withdrawal needs. In contrast, liquidating even part of a CD requires you to cash out the whole thing and pay a sizable surrender charge.
Other features of MYGA annuities include the ability to withdraw interest as monthly income and the 10% IRS tax penalty. The first is a positive, the second is a negative. Remember that all annuities are subject to a 10% tax penalty when liquidated prior to the age of 59.5.
The most important consideration is age. Are you retired or close to retirement? Are you near or over the age of 59.5? If so, annuities will out-perform CDs because of their tax-deferral benefits and more competitive rates. If you're a younger investor, go with CDs to avoid the 10% tax penalty.
As for choosing between fixed and MYGA annuities, there's really little difference. With near identical benefits, go with whichever annuity happens to offer the higher rate. Just keep in mind that fixed annuities don't necessarily guarantee their rate for the full term.
The Annuity Rate Report contains today's state specific annuity rates.
You'll receive a one-time email with today's highest rates and product guidelines. Purely Informational.
We here to help in anything you
need. Call us on below number.
The following disclaimer governs the use of www.allthingsannuity.com and links from it. By using this website, you agree to the following Disclaimer, Terms and Conditions, and Privacy Policy. The term “you” means a user of this website. The term “our” or “we” means All Things Annuity, its website(s), and any agent of All Things Annuity. The website is owned by Mac Life Marketing, INC (“All Things Annuity”), a Minnesota company. All Things Annuity provides users with general and educational information about annuities and may refer users to unaffiliated financial professionals who are licensed in the user’s state and thereby qualified to address a user’s individual financial situation, which could include evaluating an annuity, providing rates or illustrations and discussing investment risks. Any information provided through this website or through links to other websites are provided for educational and general informational purposes only and should not be construed as legal, investment, financial or tax advice. The information published at this website is not intended to be a recommendation to purchase an annuity. You are strongly urged to consult with a financial professional to determine if an annuity product is suitable to your financial situation. All Thing Annuity accepts no responsibility for any investment decision made by any user of this website, and it is not responsible for any advice or recommendation made to any user by unaffiliated financial professionals to whom the user is referred. Copyright © All Things Annuity 2022. All rights reserved.