MYGAs: Complete Protection with a Guaranteed Rate

Key Takeaways

• Multi-Year Guaranteed Annuities (MYGAs) offer 100% principal protection with a guaranteed fixed rate of return for a set term.
• MYGAs often offer higher rates than CDs or money market funds, with the added benefit of tax-deferred growth.
• These solutions are well-suited for low-risk investors, fixed-income seekers, or anyone managing cash with a specific time horizon.

For investors who want complete protection and a predictable return, the Multi-Year Guaranteed Annuity, or MYGA, offers one of the simplest, most straightforward options available. Think of it as a certificate of deposit (CD) but often with a higher rate, tax-deferred growth, and the backing of an insurance company.

MYGAs offer 100% principal protection along with a guaranteed fixed rate of return for a specific term—typically ranging from 2 to 10 years. One key difference from a CD:  while CD’s are backed by FDIC insurance up to $250,000, a MYGA’s guarantee instead comes from the financial strength of the insurance company that issues it. It’s worth understanding the rating of the insurance company issuing the product before purchasing.

MYGAs also offer tax-deferred growth, which is another point of contrast with a CD. With a CD, you typically owe taxes on interest every year, even if you never touch the money. With a MYGA, your earnings compound without being taxed annually—you only pay tax when you eventually withdraw funds, which can allow your money to grow faster over the same period.

MYGAs may be suited for conservative investors who prioritize security and predictability. They have lower liquidity than some other options, so they work best as a component of a broader retirement income plan.

Consider a MYGA when you’re looking for:

Principal Protection: MYGAs guarantee your initial investment—a vital safety net during the “Fragile Decade.”

Fixed Income Alternative: Looking to reduce equity risk? MYGAs offer reliable yields and downside protection, serving as an alternative to traditional bonds.

Cash Replacement: MYGAs often outperform CDs and money market funds, helping your “safe money” work harder over a defined time horizon.

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Disclosures:

This material is provided for educational purposes only and does not constitute investment, legal, tax, or insurance advice. It should not be relied upon as a recommendation to purchase, sell, or exchange any security or insurance product. Investors should consult their financial, tax, and legal professionals before making financial decisions.

Annuities are insurance products issued by insurance companies. Guarantees are subject to the claims paying ability and financial strength of the issuing insurer. Product features, limitations, fees, surrender charges, and availability vary by contract and carrier.

Multi-year guaranteed annuities (MYGAs) are not FDIC insured and are not bank deposits.