What is a multi-year guaranteed annuity? | F&G

Among the different types of annuities, a MYGA—or multi-year guaranteed annuity—offers a straightforward way to earn tax-deferred interest at a fixed rate of return over time. Like all annuities, MYGAs are long-term retirement planning tools that can provide a steady, predictable income stream for life, regardless of market fluctuations or longevity. What sets MYGAs apart is their conservative approach, offering predictable investment growth and little risk.

Locking in an interest rate for multiple years

MYGAs are a kind of annuity known as fixed annuities. Fixed annuities allow your money to grow tax-deferred at a fixed interest rate. Like other fixed annuities, MYGAs earn a guaranteed rate of return on your investment with no downside risk.

A MYGA is different from a regular fixed annuity because it locks in your interest rate for the length of the contract. When you buy a MYGA, the interest rate won’t change for the full number of years you choose, no matter what happens in the market. This means you can count on your money growing at a steady pace the entire time.

For example, with a regular 5-year fixed annuity, the interest rate might only be guaranteed for the first year or two, and then it could go up or down. That could slow down how much your money grows. But with a 5-year MYGA, the interest rate stays the same for all five years, helping your savings grow more predictably.

When choosing a MYGA, it’s important to think about how long your interest rate will be guaranteed and the interest rate you are offered when you sign the contract. MYGAs are usually available for 3, 5 or 7 years, and different insurance companies may offer different rates. The combination of the rate and the term you pick should match your personal financial needs and goals. It’s a good idea to talk to a financial professional to help you make the best choice.

Options for withdrawing money

MYGAs have surrender charges, which means you could pay a penalty if you take money out early.

Most insurance companies allow penalty-free withdrawals, letting you take out some money without fees. This is usually limited to a certain amount or percentage of your contract. Some companies also let you take money out without penalties if you’re diagnosed with a terminal illness or if you’re in a nursing home or hospital.

MYGAs and CDs: What’s the difference?

Both MYGAs and Certificates of Deposit (CDs) offer a guaranteed rate of return and principal protection. Unlike stocks, these products provide your interest rate up front and lock it in during the guarantee period.

Here are a few reasons why you might consider a MYGA over a CD for retirement planning:

• With a MYGA, you won’t pay taxes on the interest you earn until you take the money out. With a CD you usually pay taxes on the interest every year.
• MYGAs have the potential to offer better interest rates than CDs, especially for longer terms.
• MYGAs are meant to fit into retirement planning, with options for guaranteed income and benefits riders. CDs may lack these retirement-friendly features.
• MYGAs come in terms of up to 10 years, meaning you can lock in a steady rate for a longer time. CDs usually have shorter terms.

Is a MYGA the right choice for you?

Choosing a MYGA depends on your retirement goals and your personal finances. A financial professional can help you figure out what’s best for you, considering:

• What you want to achieve with your money
• What other savings or retirement plans you already have
• How close you are to retirement