12 Essential Questions About Multi-Year Guaranteed Annuities (MYGAs)
Clear answers for building steady retirement confidence
You’ve probably searched for retirement savings options and stumbled across something called a Multi-Year Guaranteed Annuity (or MYGA). If you’ve tried to research them online, you may have found the explanations full of jargon and half-answers that can be confusing.
Here’s the good news: MYGAs are straightforward once you understand the basics. At their core, they’re about exchanging uncertainty for certainty. You put aside money for a set number of years, and in return, you receive a guaranteed interest rate, written into your contract, so you know in advance what your account will be worth at the end of the term.
Whether you’re planning ahead in your 40s or making important retirement decisions in your 60s, these 12 questions will help you understand exactly how MYGAs work and whether they might be a fit for you.
The Foundation: What You’re Actually Buying
1. What exactly is a MYGA, and why should I care?
Think of a MYGA as similar in some respects to of a certificate of deposit (CD). You give an insurance company a lump sum, they guarantee a fixed interest rate for a set number of years, and your money grows tax-deferred until you withdraw it.
The difference from a CD? MYGAs are designed specifically for retirement planning. They offer stability and predictability in a world where markets and headlines are always shifting. Unlike bank CDs, MYGAs are not FDIC-insured; instead, they are backed by the claims-paying ability of the issuing insurance company.
2. How much money do I need to get started with a MYGA?
Most MYGAs require at least $20,000. People often use rollover money from a 401(k), an IRA, or cash from a CD that’s just matured. Some even use inheritances or settlement money. MYGAs are built for meaningful chunks of savings, money you can commit to leaving in the contract .
3. What are “guarantee periods”?
That’s the number of years your interest rate is locked. Most MYGAs range from 2 to 10 years. A shorter period gives you flexibility; a longer one locks in today’s rate for the long haul. Many people land in the middle of 5 years. Ultimately it will depend on the unique circumstances of the individual purchasing the annuity.
The Money: Rates, Returns, and Reality Checks
4. Can my interest rate change?
Generally it does not change. Your rate is generally locked for the entire guarantee period. It won’t go up, and it won’t go down. That predictability can be very attractive to some clients.
5. How do MYGAs compare to other safe options?
MYGAs often will offer higher rates than CDs, depending on market conditions. Annuities also offer the benefit of tax deferral for non-qualified funds. That means you don’t owe taxes on your earnings until you actually take the money out. Over time, that can add up to significantly more growth depending on your tax situation and the rates available at the time of purchase.
6. Will a MYGA keep up with inflation?
Not directly. A MYGA won’t automatically rise with inflation. The role of a MYGA is to be your stable foundation, the part of your overall retirement plan you can count on. Other parts of your portfolio can focus on keeping up with inflation.
The Access: Getting to Your Money
7. Can I access my money if I need it?
Yes, but with rules. Most MYGAs allow you to take out up to 10% of your account each year without penalty. Beyond that, early withdrawals may trigger surrender charges, especially in the first few years. Withdrawals prior to age 59½ from tax-deferred accounts may also be subject to an additional 10% IRS penalty.
8. What is a Market Value Adjustment (MVA)?
An MVA adjusts your payout if you withdraw early and interest rates have moved significantly. The simple version: if you stick to your plan and hold the MYGA to maturity, you’ll never have to worry about it. The impact of an MVA can be positive or negative depending on interest rate changes at the time of withdrawal.
9. How are MYGAs taxed?
Earnings grow tax-deferred. You’ll only pay ordinary income tax when you withdraw. If you use retirement account money, you get the same tax rules you already have with IRAs or 401(k)s. For non-retirement money, tax deferral can be especially valuable.
The Strategy: Is This Right for You?
10. Who should consider a MYGA—and who shouldn’t?
- Good fit if you: Value safety and predictability, want a potentially higher fixed rate than some bank products, better rate than the bank, and can leave the money alone for several years.
- Not a fit if you: Want maximum growth potential, need frequent access, or expect equity-like returns.
11. How do MYGAs fit into my retirement plan?
Think of them as the “steady paycheck” portion of your strategy. They can cover essentials with guaranteed growth while freeing up other investments to focus on inflation protection and long-term growth.
Some retirees even “ladder” MYGAs purchasing multiple contracts with staggered end dates, to create reliable payouts at different points in retirement.
12. What happens to my MYGA when I die?
Your beneficiaries typically receive the full account value, without surrender charges. Spouses can often continue the contract, while children or other heirs usually get the payout directly. It’s a simple way to leave something predictable for loved ones.
The Bottom Line
Multi-Year Guaranteed Annuities don’t try to be everything. They’re not designed to beat the stock market or hedge inflation. MYGAs do provide guaranteed growth, tax deferral, and peace of mind, three qualities that matter when building a retirement plan you can count on.
The real question is: Do you want part of your savings locked in with certainty, so you can feel confident about taking risks elsewhere? If the answer is yes, then MYGAs may deserve a place in your overall retirement strategy. As with any financial decision, consider speaking with a licensed financial professional to evaluate whether a MYGA aligns with your overall retirement plan.
Disclaimers
Guarantees are based on the financial strength of the issuing carrier. The multi-year guarantee annuity product with form number IIC19 OLA SPDA, or variations of such, are issued by Oceanview Life and Annuity Company (d/b/a Oceanview Life and Annuity Insurance Company in California; NAIC# 68446). May not be available in all states. Not available in the state of New York or Vermont. Policy form numbers and provisions may vary. Rates are guaranteed depending on the guarantee period selected at policy issue.
Annuities issued by Oceanview Life and Annuity Company, 1331 17th St., Suite 1050, Denver, CO 80202. In California, doing business as Oceanview Life and Annuity Insurance Company www.oceanviewlife.com.
HARBOURVIEW ANNUITIES ARE PRODUCTS OF THE INSURANCE INDUSTRY AND NOT GUARANTEED BY ANY BANK NOR INSURED BY THE FDIC OR NCUA/NCUSIF OR ANY OTHER FEDERAL GOVERNMENTAL AGENCY. MAY LOSE VALUE. NO BANK/CREDIT UNION GUARANTEE. NOT A DEPOSIT. MAY ONLY BE OFFERED BY A LICENSED INSURANCE AGENT. GUARANTEES ARE SUBJECT TO THE CLAIM PAYING ABILITY OF THE ISSUING INSURANCE COMPANY.
Annuities are generally designed as long-term retirement solutions and have certain limitations. They are generally not intended to replace emergency funds, serve as income for day-to-day expenses, or support short-term savings goals. Please review the contract for full details.
A.M. Best Rating as of December 11, 2024, is subject to change. A (Excellent) rating is third highest of fifteen possible rating classes for financial strength. The outlook assigned to these Credit Ratings is stable.
This material is a general description intended for general public, educational use. Oceanview Life and Annuity Company is not providing investment advice for any individual or in any individual situation, and therefore nothing in this correspondence should be read as such.
Withdrawals in excess of any Free Partial Withdrawal amounts are subject to a Surrender Charge and Market Value Adjustment (MVA). The MVA may have the effect of increasing or decreasing the Surrender Value of the withdrawal depending on the market interest rate changes.
The IRS may impose a penalty for withdrawals prior to age 59 ½.
Contracts purchased in an IRA or other tax-qualified plan provide no additional tax-deferral benefit, since they are already afforded tax-deferred status. All annuity features, risks, limitations, and costs should be considered prior to purchasing an annuity within a tax-qualified retirement plan. For non-qualified annuities, tax deferral is not available to corporations and certain other entities.
While care was taken in preparing this information and it is considered reliable, contract, application, illustration, and product disclosure language should be relied upon when contrary. The Company reserves the right to correct any typographical errors that may exist.
Rates, renewal caps, and declared interest rates, will always follow contract provisions relative to minimums and maximums stated. Oceanview determines, at its discretion, the rates, renewal caps and, declared interest rates above the contractual minimums that are guaranteed.