MYGA Annuity Guide 2025: Secure Rates Explained

Planning for retirement or seeking financial stability often leads individuals down a path filled with complex choices and market uncertainties. If you’re looking for a way to grow your savings with a guaranteed interest rate, shielded from market volatility, a Multi-Year Guaranteed Annuity, or MYGA, might be a compelling option. But what exactly is a MYGA annuity, and how does it work? Is it the right choice for your specific financial goals?

This guide, updated for 2025, will provide a comprehensive overview of MYGA annuities. We’ll explore their features, benefits, potential drawbacks, and how they compare to other financial products. Critically, we’ll also discuss why navigating the annuity market requires careful consideration and how choosing the right partner can make all the difference.

Here at Insurance By Heroes, we understand the importance of security and trust, values deeply ingrained in our foundation. Founded by a former first responder and military spouse, our agency is staffed by professionals who share a background in public service. This unique perspective drives our commitment: to serve our clients with the same dedication we brought to our communities. As an independent agency, we aren’t tied to any single insurance company. Instead, we partner with dozens of top-rated carriers across the nation. This allows us to shop the market extensively, comparing rates and features to find the insurance and annuity products that genuinely align with your individual needs and budget, not a predetermined sales quota.

Understanding financial products like MYGAs can feel overwhelming, but our goal is to provide clarity and help you make informed decisions. Let’s dive into the world of Multi-Year Guaranteed Annuities.

First Things First: What Is an Annuity?

Before focusing specifically on MYGAs, it helps to understand the broader category they belong to: annuities. In simple terms, an annuity is a contract between you and an insurance company. You agree to pay the insurer a sum of money (either a single lump sum or multiple payments over time), and in return, the insurance company agrees to make payments back to you, either immediately or at some point in the future. Alternatively, the contract might focus on accumulating funds on a tax-deferred basis for later use.

Annuities are designed primarily for long-term goals, particularly retirement planning. They come in several varieties, generally falling into these main categories:

• Fixed Annuities: These offer a guaranteed interest rate for a specific period. MYGAs fall under this umbrella, known for their multi-year rate guarantees.
• Variable Annuities: These allow you to invest your premium in sub-accounts, similar to mutual funds. The value of the annuity and potential income payments can fluctuate based on market performance. They offer potential for higher returns but also carry market risk.
• Fixed Indexed Annuities (FIAs): These offer potential interest crediting based on the performance of a specific market index (like the S&P 500), but they also typically include a guaranteed minimum return, protecting your principal from market losses. They are more complex than fixed annuities.

Understanding this basic framework helps position MYGAs as a specific type of fixed annuity focused on providing predictable, guaranteed returns over a set number of years.

What Exactly is a MYGA Annuity?

A Multi-Year Guaranteed Annuity (MYGA) is a type of fixed annuity that provides a fixed interest rate for a predetermined period, typically ranging from three to ten years. Think of it as being similar in concept to a Certificate of Deposit (CD) offered by a bank, but issued by an insurance company and carrying different features, benefits, and considerations.

The core promise of a MYGA is straightforward: you deposit a lump sum premium, and the insurance company guarantees that your money will grow at a specific, unchanging interest rate for the entire duration of the guarantee term you select. For instance, if you purchase a 5-year MYGA with a 5.0% guaranteed rate, your money will earn that 5.0% interest each year for the full five years, regardless of what happens in the broader economy or interest rate environment.

This predictability is the primary appeal of MYGA annuities, especially for individuals seeking safety of principal and a known return on their investment. The guarantee is backed by the financial strength and claims-paying ability of the issuing insurance company.

How Do MYGA Annuities Work?

The mechanics of a MYGA annuity are relatively simple compared to more complex annuity types:

1. The Contract & Premium: You enter into a contract with an insurance company and pay a premium, usually a single lump sum. Minimum premium requirements vary by company and product.
2. The Guarantee Period & Interest Rate: You select a guarantee term (e.g., 3, 5, 7 years). The insurance company provides a corresponding fixed interest rate that is guaranteed for that entire term. This rate is locked in and will not change during the specified period.
3. Tax-Deferred Growth: One of the key advantages over products like bank CDs is that the interest earned within a MYGA annuity grows on a tax-deferred basis. This means you don’t pay income taxes on the interest earnings each year. Instead, taxes are deferred until you withdraw money from the annuity. This allows your interest to compound more efficiently, as the money that would have gone to taxes remains invested and earns further interest.
4. End of the Guarantee Term: When the guarantee period concludes, you typically have several options:
   • Renew the Contract: You can often renew the annuity for another guarantee period. However, the renewal interest rate will be based on the prevailing rates at that time and may be higher or lower than your initial rate. The insurance company will declare the new rate available for the renewal term.
   • Annuitize: You can convert the accumulated value of the annuity into a stream of regular income payments. These payments can be structured to last for a specific period or for the rest of your life (or the lives of you and your spouse).
   • Withdraw the Full Value: You can surrender the annuity and receive its full accumulated value. Keep in mind that any gains (the difference between the accumulated value and your original premium) will be subject to ordinary income tax at that time.
   • 1035 Exchange: You can typically transfer the funds directly to another annuity contract using a Section 1035 exchange under the Internal Revenue Code. This allows the funds to move without triggering immediate taxation, preserving the tax-deferred status. This is a common strategy if the current MYGA’s renewal rates are unattractive or if another annuity better suits your evolving needs. Insurance By Heroes frequently assists clients in evaluating these end-of-term options and facilitating 1035 exchanges when appropriate, ensuring a smooth transition by comparing offerings from multiple carriers.

Advantages of MYGA Annuities

MYGAs offer several appealing features, particularly for those prioritizing safety and predictability:

Guaranteed Interest Rate

This is the cornerstone benefit. Knowing exactly what interest rate your money will earn for a specific number of years provides significant peace of mind, especially during volatile market conditions. It eliminates the guesswork associated with investments tied directly to market performance.

Principal Protection

When held for the full guarantee term, your initial premium in a MYGA annuity is protected from market loss. The value is determined by the guaranteed interest rate, not stock market fluctuations. This guarantee is backed by the claims-paying ability of the issuing insurance company. Selecting a financially strong insurer is crucial, a factor Insurance By Heroes prioritizes when recommending carriers.

Tax-Deferred Growth

As mentioned earlier, the ability for your earnings to grow without being taxed annually is a powerful advantage. Tax deferral allows for potentially faster accumulation compared to fully taxable alternatives like CDs, as your interest earns interest over time (compounding) without the drag of annual taxation. Taxes are only due when you withdraw the gains.

Simplicity

Compared to variable or indexed annuities, MYGAs are generally straightforward and easier to understand. The core concept is simple: a fixed rate for a fixed term. There are typically no complex formulas, caps, participation rates, or spreads tied to market indexes to decipher.

Variety of Term Lengths

Insurance companies offer MYGAs with various guarantee periods, commonly ranging from 3 to 10 years. This flexibility allows you to choose a term that aligns with your specific time horizon and financial goals. For example, you might choose a shorter term if you anticipate needing the funds sooner or want to reassess interest rates in a few years, or a longer term if you desire rate security for an extended period.

Things to Consider Before Choosing a MYGA

While MYGAs offer attractive benefits, they also come with potential drawbacks and important considerations. It’s crucial to understand these before committing your funds:

Limited Liquidity and Surrender Charges

MYGA annuities are designed as long-term accumulation vehicles. Accessing your money before the end of the guarantee period usually comes at a cost. Most MYGAs impose surrender charges if you withdraw more than a specified “free withdrawal” amount (often 10% of the account value per year, sometimes only after the first contract year). These charges are typically a percentage of the amount withdrawn and decrease over the duration of the surrender charge period, eventually reaching zero at the end of the guarantee term.

It’s essential to understand the surrender charge schedule specific to the MYGA contract you are considering. If you anticipate needing access to a significant portion of your principal before the term ends, a MYGA might not be the most suitable option.

Market Value Adjustments (MVAs)

Some, but not all, MYGA contracts include a Market Value Adjustment (MVA). An MVA can increase or decrease the amount you receive if you surrender the contract or withdraw funds exceeding the free withdrawal limit *before* the end of the guarantee period. The adjustment is typically tied to the movement of interest rates since you purchased the contract. If interest rates have risen, the MVA will likely decrease your surrender value. Conversely, if interest rates have fallen, the MVA could potentially increase your surrender value (though this is less common and often capped). The presence and calculation of an MVA add a layer of complexity and potential risk if early withdrawal becomes necessary. Understanding whether a MYGA includes an MVA, and how it works, is vital. This is an area where comparing contracts from different carriers is essential, something an independent agency like Insurance By Heroes excels at.

Interest Rate Risk

While the guaranteed rate provides security, it also means you’re locked into that rate for the entire term. If prevailing interest rates rise significantly after you purchase your MYGA, you won’t benefit from the higher rates until your current term ends. You might experience an opportunity cost compared to shorter-term investments that could capture rising rates sooner.

Furthermore, the interest rate offered upon renewal at the end of your term is not guaranteed. It will be based on the interest rate environment at that time and the rates the insurer is offering for new terms, which could be lower than your initial rate.

Inflation Risk

A fixed interest rate, even if guaranteed, may not always keep pace with inflation. If the rate of inflation is higher than your MYGA’s interest rate, the purchasing power of your money could erode over time. This is a consideration for any fixed-income investment, especially over longer terms.

Taxation on Withdrawal

While growth is tax-deferred, withdrawals of earnings from a non-qualified annuity (funded with post-tax dollars) are taxed as ordinary income, not potentially lower long-term capital gains rates. For withdrawals from non-qualified annuities, the IRS uses a Last-In, First-Out (LIFO) approach, meaning the taxable earnings are considered withdrawn first before you access your non-taxable principal (original premium). If you are under age 59 ½, withdrawals of earnings may also be subject to a 10% federal tax penalty, in addition to ordinary income tax.

Insurer Solvency

The guarantees associated with any annuity, including MYGAs, are backed solely by the financial strength and claims-paying ability of the issuing insurance company. They are not FDIC-insured like bank CDs. While state guaranty associations provide a safety net, coverage limits vary by state and may not cover the full value of your annuity. Therefore, it is crucial to choose an insurance company with high financial strength ratings from independent rating agencies like A.M. Best, Standard & Poor’s (S&P), and Moody’s. Insurance By Heroes makes insurer financial stability a top priority when evaluating products for clients, drawing only from reputable, highly-rated carriers.

Is a MYGA Annuity Right for You?

A MYGA annuity can be an excellent tool for the right person in the right situation. Consider if you fit into one or more of these categories:

• Conservative Investors: If your primary goal is preserving principal and earning a predictable return, rather than maximizing potential growth through market exposure, a MYGA aligns well.
• Nearing or In Retirement: Individuals looking to de-risk a portion of their portfolio as they approach or enter retirement often find MYGAs appealing for their stability.
• CD Alternatives Seekers: If you like the security of CDs but desire potentially higher rates and the benefit of tax-deferred growth, a MYGA is worth exploring.
• Those with Long-Term Funds: If you have a lump sum of money that you are confident you won’t need access to for the duration of the guarantee term (beyond any free withdrawal provisions), a MYGA can be suitable.
• Portfolio Diversification: MYGAs can serve as the stable, fixed-income component of a diversified investment portfolio, balancing out riskier assets.

However, a MYGA might *not* be the best fit if:

• You need regular access to your principal beyond the free withdrawal limits before the term ends.
• You are seeking high growth potential and are comfortable with market risk.
• You are in a very low tax bracket where tax deferral offers minimal benefit.
• Your investment time horizon is very short (less than the available MYGA terms).

Every individual’s financial situation, risk tolerance, and goals are unique. A former firefighter might prioritize absolute safety for a portion of their pension rollover, while a military family might look for a specific term length matching a future relocation goal. At Insurance By Heroes, our background in service helps us understand these diverse perspectives. Because we are an independent agency, we don’t push one-size-fits-all solutions. We take the time to understand your specific circumstances before recommending any product, ensuring it truly serves your objectives.

MYGAs vs. Other Financial Products

How does a MYGA stack up against other common financial vehicles?

MYGAs vs. Certificates of Deposit (CDs)

• Issuer: MYGAs are issued by insurance companies; CDs are issued by banks or credit unions.
• Insurance: MYGA principal is backed by the insurer’s claims-paying ability and state guaranty associations (limits vary); CDs are typically FDIC-insured up to $250,000 per depositor, per insured bank, for each account ownership category.
• Taxation: MYGA earnings grow tax-deferred; CD interest is typically taxed annually as ordinary income.
• Liquidity: MYGAs often have surrender charges for early withdrawal beyond limits; CDs usually have penalties for early withdrawal, often forfeiture of a certain amount of interest.
• Rates: Rates can be comparable, but MYGAs sometimes offer slightly higher rates than CDs of similar terms due to the different regulatory and structural nature.

MYGAs vs. Traditional Fixed Annuities

MYGAs are technically a subset of fixed annuities. The main distinction is the emphasis on the *multi-year* guaranteed rate lock. Some traditional fixed annuities might offer an initial rate guarantee for one year, with rates potentially resetting annually thereafter, whereas MYGAs explicitly guarantee the rate for the full multi-year term (e.g., 3, 5, 7 years).

MYGAs vs. Fixed Indexed Annuities (FIAs)

• Growth Potential: MYGAs offer a predetermined, fixed interest rate. FIAs offer the potential for interest credits linked to the performance of an external market index (e.g., S&P 500), often subject to caps, participation rates, or spreads.
• Complexity: MYGAs are generally simpler. FIAs involve more moving parts and require a deeper understanding of how interest crediting methods work.
• Risk/Reward: MYGAs provide a known, guaranteed return. FIAs offer the *potential* for higher returns than MYGAs if the linked index performs well, but also the possibility of zero interest credited in years the index is flat or down (though principal is typically protected).
• Fit: Choosing between them depends heavily on your risk tolerance and desire for potential growth versus certainty. Insurance By Heroes can help illustrate the differences using specific product examples from various carriers.

MYGAs vs. Bonds

• Structure: MYGAs are insurance contracts; bonds are debt instruments issued by corporations or governments.
• Value Fluctuation: MYGA value grows predictably based on the guaranteed rate (unless surrendered early with an MVA); individual bond prices can fluctuate in the secondary market based on interest rate changes and credit quality.
• Taxation: MYGA growth is tax-deferred; bond interest is typically taxed annually (except for tax-exempt municipal bonds).
• Liquidity: MYGAs have surrender charges; bonds can often be sold before maturity on the secondary market, but potentially at a loss or gain depending on market conditions.

Finding the Best MYGA Annuity for Your Needs: The Insurance By Heroes Advantage

Choosing a MYGA annuity isn’t just about finding the highest advertised interest rate. The details matter significantly, and they vary widely from one insurance company to another. Factors like:

• The specific guaranteed interest rate for the term you want.
• The length of the guarantee terms offered (3, 5, 7, 10 years, etc.).
• The minimum and maximum premium amounts accepted.
• The surrender charge schedule (percentage and duration).
• Free withdrawal provisions (percentage allowed, when they start).
• The presence and calculation method of a Market Value Adjustment (MVA).
• The financial strength ratings of the issuing insurance company.
• Renewal rate history and process.

All these elements contribute to whether a specific MYGA is truly the right fit for you. A product that looks great on the surface might have restrictive withdrawal features or be issued by a lower-rated carrier.

This is where working with an independent agency like Insurance By Heroes provides a distinct advantage. Unlike captive agents who represent only one company and its limited product suite, we have access to dozens of the nation’s top insurance carriers. Our independence allows us to be truly objective.

Our foundation, built by a former first responder and military spouse, instills a deep understanding of the importance of security, planning, and trust. Our team, composed of professionals with similar service-oriented backgrounds, approaches each client relationship with a commitment to education and finding the best possible solution, not just making a sale. We know that financial decisions are deeply personal and often crucial for long-term well-being.

We take the time to understand your unique situation, risk tolerance, and financial goals. Then, we leverage our extensive network of carriers to shop the market *for you*. We compare MYGA annuity rates, features, and insurer ratings side-by-side, explaining the nuances of each contract in clear, understandable language. We firmly believe that not every MYGA is suitable for every person, and our role is to help you find the one that aligns perfectly with your objectives and provides the security you deserve.

How We Help You Secure Your Financial Future

Engaging with Insurance By Heroes for your MYGA annuity needs follows a straightforward, client-focused process:

1. Consultation & Discovery: We start with a conversation to understand you. What are your financial goals? What’s your timeline? What level of risk are you comfortable with? What funds are you considering using?
2. Market Analysis & Comparison: Based on your input, we access our network of top-rated carriers to identify suitable MYGA options. We analyze current rates, terms, features, and insurer financial strength.
3. Clear Explanation & Recommendation: We present the most relevant options to you, clearly outlining the pros and cons of each. We explain the contract details, including surrender charges, withdrawal provisions, and any potential MVAs. Our goal is to empower you with information, never to pressure you.
4. Application & Ongoing Support: If you decide to proceed, we assist you with the application process, ensuring accuracy and efficiency. We remain available to answer any questions you may have throughout the life of your contract.

Take Control with a Predictable Path Forward

Multi-Year Guaranteed Annuities offer a compelling solution for individuals seeking safety of principal, a guaranteed rate of return, and tax-deferred growth over a specified period. They can be a valuable tool for retirement planning and portfolio stabilization, especially in uncertain economic times.

However, the variations between products and carriers are significant. Choosing the right MYGA requires careful consideration of the contract details and the financial strength of the issuing insurer. It’s not a decision to be made lightly or based solely on an advertised rate.

Don’t navigate the complex insurance market alone. Partner with an agency that puts your interests first. Insurance By Heroes, founded by service-minded professionals and committed to objective advice, is ready to help. As an independent agency, we work for you, not for an insurance company. We’ll compare options from dozens of top carriers to find the MYGA annuity with the guaranteed rate, term, and features that truly fit your unique financial plan.

Ready to explore how the security and predictability of a MYGA annuity could benefit you? Ready to see what guaranteed rates are available today? Take the next step towards securing your financial future. Get your personalized, no-obligation MYGA annuity quote now by filling out the simple form on this page. Let the team at Insurance By Heroes serve you.

Disclaimer: Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. They are not FDIC insured. Withdrawals of earnings are subject to ordinary income tax, and a 10% federal penalty may apply to withdrawals prior to age 59 ½. Surrender charges and Market Value Adjustments (MVAs) may apply to early withdrawals. This article is for informational purposes only and does not constitute financial or tax advice. Consult with a qualified financial professional and tax advisor before making any investment decisions.