A multi-year guaranteed annuity (MYGA) is a fixed annuity sold by an insurance company. You deposit a lump sum, the insurer guarantees one interest rate for a set term, usually 3 to 10 years, and your earnings grow tax-deferred. It often pays more than a bank CD of the same length. In exchange, your money is less liquid, it is not FDIC-insured, and leaving early can trigger surrender charges and taxes. This guide explains how a MYGA works, how it differs from a CD, and how to decide whether it belongs in your retirement plan.
TL;DR
- A MYGA locks in a fixed rate for a set term, typically 3 to 10 years, with minimum deposits that often run from $5,000 to $10,000.
- MYGAs usually beat CDs on rate, but they are backed by the insurer and your state guaranty association, not the FDIC.
- Early withdrawals beyond the free-withdrawal allowance (often 10% a year) bring surrender charges, and gains are taxed as ordinary income.
- A MYGA fits money you will not need for the full term. It is a poor home for your emergency fund.
- Plan the maturity date in advance: your rate guarantee ends, and your options need a decision.
Table of Contents
- What a MYGA is, in plain terms
- How MYGA rates look right now
- MYGA vs. CD: the differences that matter
- MYGA vs. other fixed annuities
- The real downsides
- Who a MYGA tends to suit
- A step-by-step way to evaluate a MYGA
- Our perspective on MYGAs
- How a MYGA fits with your health and Medicare plans
- Talk it through with an advisor
- FAQ
- Sources
What a MYGA is, in plain terms
The name says most of it. Multi-year: the contract runs for several years. Guaranteed: the insurer commits to a fixed rate for that whole stretch, no matter what markets or interest rates do. Annuity: the contract is issued by an insurance company rather than a bank.
According to Investor.gov, an annuity is a contract between you and an insurance company, built for retirement and other long-term goals, and you fund it with a single lump sum or a series of payments. A MYGA is the simplest version of that idea. It is a fixed annuity: no stock market exposure, no investment sub-accounts, no surprise about what you will have at the end of the term.
Here is a worked example. Suppose you deposit $100,000 into a 5-year MYGA at a hypothetical 5.00% guaranteed rate, compounding annually. After five years the contract value would be about $127,628. You knew that number on day one. The rate and the term are the whole product, which is why shoppers compare MYGAs the way they compare CDs.
That example is an illustration, not a quote. Actual rates change daily and vary by insurer, term and deposit size.
How MYGA rates look right now
Rates move with the broader interest-rate environment and with each insurer's appetite for new money. As of October 19, 2026, one rate comparison board listed a top MYGA rate of 6.45% on an 8-year term, with the best 3-year rate at 6.10%. Those figures are a snapshot from a single board and change constantly. A rate you see in a headline may also require a larger deposit than you plan to make, or may be offered only in certain states.
Two habits help when you compare:
- Compare the guaranteed rate, not a teaser. Some contracts pay a first-year bonus or a rate that applies only to the first period. Ask what the rate is for each year of the term.
- Compare the insurer, not just the number. The highest rate often comes from a lesser-known carrier. A slightly lower rate from a financially stronger company can be the better trade, and the next section explains why.
MYGA vs. CD: the differences that matter
Most people ask about MYGAs because they already own CDs, or because a CD maturing at the bank has them shopping around. The two products look alike on a rate sheet and behave differently when something goes wrong or when you want your money.
| Feature | MYGA (fixed annuity) | Bank CD |
|---|---|---|
| Issued by | Insurance company | Bank or credit union |
| Rate | Fixed for the term, usually 3 to 10 years | Fixed for the term, often months to a few years |
| Protection | Insurer's claims-paying ability plus state guaranty association | FDIC or NCUA insurance, up to $250,000 |
| Taxes | Interest grows tax-deferred; withdrawals taxed as ordinary income | Interest taxed each year, even if you reinvest it |
| Early access | Surrender charges after the free-withdrawal allowance | Early-withdrawal penalty, usually a few months of interest |
| Best used for | Long-term retirement savings you will not touch | Short- to medium-term cash and liquidity |
Rate
Annuity rates are often higher than CD rates for the same term. One industry comparison found that five-year fixed annuities averaged 5.66% in January 2025, while the national deposit rate for five-year CDs was 2.07%. The gap changes with the market, and some banks pay far more than the national average on promotional CDs, so check current numbers on both sides before deciding.
Safety
This is where people get tripped up. A CD is FDIC-insured up to $250,000 per depositor, per bank, per ownership category. A MYGA is not FDIC-insured. Your protection is the insurer's claims-paying ability, backed by state guaranty associations, and the limits vary by state, typically between $250,000 and $500,000.
For Michigan residents, the Michigan Life & Health Insurance Guaranty Association covers up to $250,000 in the present value of annuity benefits per person, regardless of how many contracts you hold with the same company. Its own example makes the point: three $100,000 annuities with one insurer would be protected only up to $250,000 in total. Guaranty coverage is a backstop with limits and conditions, not a promise that you would be made whole instantly, so the strength of the insurer still comes first. Before you buy, look up the company's financial strength rating from the rating agencies.
If you are placing more than $250,000, one common approach is to split the money across more than one A-rated insurer so each contract sits within the guaranty limit.
Time horizon
The practical split is how long you plan to leave the money alone. According to Investopedia's comparison, CDs work as short- to medium-term liquidity tools, while MYGAs are mainly long-term retirement accumulation vehicles where interest compounds over several years. If you may need the cash in eighteen months for a roof or a car, a CD or savings account is the cleaner tool.
Taxes
CD interest is taxable in the year it is earned, even if you leave it in the account. MYGA earnings are tax-deferred, so you pay when you withdraw. That deferral can help, but it is not a free lunch. Withdrawals from a non-qualified annuity are taxed as ordinary income rather than at long-term capital gains rates, and a large lump-sum withdrawal at maturity can push you into a higher bracket. If you withdraw earnings before age 59½, you may owe a 10% additional federal tax on top. Your tax preparer should look at the numbers before you sign, particularly if you will also take Social Security or required distributions.
MYGA vs. other fixed annuities
A MYGA is a fixed annuity, so the question "MYGA or fixed annuity?" is partly one of vocabulary. The useful distinction is how the rate behaves:
- MYGA: the rate is locked for the entire guarantee period. You know the value at the end.
- Traditional fixed annuity: the insurer declares a rate that can reset, often yearly, after an initial period, subject to a contractual minimum.
- Fixed indexed annuity: credits are linked to a market index with caps or participation rates, so the return is not known in advance.
If your goal is certainty, the MYGA is the cleanest of the three. If you want the possibility of higher growth and accept a less predictable outcome, that is a different conversation with different trade-offs.
The real downsides
What is the downside of a MYGA? Four things come up repeatedly.
Surrender charges
A surrender charge is not the same as a bank's early-withdrawal penalty. In an annuity, it can last for the entire guarantee period, often 3 to 10 years, and is typically a percentage of the amount you take out that declines each year. Many contracts let you withdraw about 10% a year without a charge. Ask for the surrender schedule in writing and read the free-withdrawal terms before you fund the contract.
Some contracts also apply a market value adjustment, which can raise or lower what you receive on an early exit depending on interest rates at that time. If the contract has one, ask for a worked example.
No FDIC insurance
Covered above. The protection is real, but it is a different kind of protection, with limits that depend on your state.
Taxes and the 59½ rule
Also covered above. Money held in an IRA already has its own tax rules, and a MYGA inside an IRA does not add extra deferral. Whether a MYGA belongs inside or outside a retirement account depends on your overall picture.
Reinvestment risk at maturity
When the guarantee period ends, so does your locked rate. Advisors often remind clients that you generally have three choices: renew at the prevailing rate, which could be lower, exchange into another annuity tax-free through a Section 1035 exchange, or withdraw the money. Each requires attention as the end date approaches, and insurers' renewal notices can be easy to miss. Put the maturity date on your calendar the day you buy.
Who a MYGA tends to suit
A MYGA is most useful for people close to retirement who want tax deferral and a guaranteed return. In practice, it tends to fit people who:
- have already built an emergency fund and have cash for the next few years of spending;
- want part of their savings insulated from market swings, for example in the years just before and after retiring;
- have CDs maturing and want to compare a longer guarantee;
- have a lump sum from a pension, a 401(k) rollover or the sale of a home, and a clear idea of when they will need it.
It tends to fit poorly if you might need the money within the term, if you already hold most of your assets in one insurer's products, or if you are buying it only because of a headline rate.
A step-by-step way to evaluate a MYGA
- Set the purpose and the date. Decide what this money is for and when you expect to need it. Choose a term that ends before that date, not after.
- Check your liquidity. Make sure you can cover emergencies, medical costs and a year or two of spending without touching the contract.
- Compare rates across several insurers. Look at the same term and deposit level, and confirm the rate is guaranteed for the whole period.
- Check the insurer's financial strength. Look at the rating agency scores, not just the advertised rate.
- Read the surrender schedule and free-withdrawal terms. Know exactly what an early exit would cost, and whether a market value adjustment applies.
- Confirm the guaranty limit. Compare the deposit with your state's annuity limit and split across insurers if you exceed it.
- Ask about taxes. Have your tax professional estimate what a withdrawal at maturity would do to your bracket, and consider how and when you will draw the money.
- Calendar the maturity date. Plan the renewal, exchange or withdrawal at least a few months before the guarantee ends.
The NAIC's buyer's guide to fixed deferred annuities is a good neutral reference to read before you talk to anyone, and it will help you spot the questions worth asking.
Our perspective on MYGAs
We work with retirees and pre-retirees in Michigan every week, and the same pattern shows up. People rarely come to us asking about a MYGA in isolation. They come because a CD is maturing, because they just rolled over a 401(k), or because they are about to turn 65 and are rebuilding their budget around Medicare premiums and out-of-pocket costs.
Our view is that a MYGA is a good tool when it solves a specific, dated problem, and a poor one when it is bought for the rate alone. We start with the other pieces of the plan: health coverage between now and Medicare, what Medicare will cost, whether life insurance still serves a purpose, and how much cash you want within reach. Only then do we ask how much, if any, belongs in a guaranteed annuity and for how long.
We are licensed with multiple carriers, so we are not tied to one company's product, and our guidance costs you nothing. We are paid by the insurance company if you choose to enroll through us, which is why we put the comparison in front of you first and let you decide. If a CD, a Treasury, or simply keeping the money liquid fits you better, we will say so.
We also stay in touch after you buy. Rate guarantees end, health needs change, and a maturity date three or five years out is easy to lose track of. Part of our job is to remind you before it matters.
— Brian
How a MYGA fits with your health and Medicare plans
A guaranteed annuity does not exist apart from your healthcare costs, and the two interact in ways people do not expect.
Before Medicare. If you retire before 65, your income determines whether you qualify for ACA marketplace subsidies. Annuity withdrawals count as income, so a large withdrawal in the wrong year can cost you premium help. Our guides on health insurance before Medicare and protecting subsidies at 62 explain how to plan the timing.
After 65. Medicare Part B and Part D premiums can rise with higher income, so a lump-sum withdrawal at maturity can have a knock-on effect two years later. If you are heading toward enrollment, start with our 2027 Michigan Medicare guide, which covers Medicare Advantage, Part D and Medigap.
Surrender rules. If you want to understand payout options and exit costs across annuity types, our article on checking surrender rules before choosing an annuity goes further.
Protecting your family. If part of your reason for an annuity is leaving money to a spouse or children, it is worth reviewing the beneficiary rules alongside your life coverage. See our six life insurance steps for retirees before you cancel or change a policy.
Talk it through with an advisor
At Platinum Benefit Advisors, we help Michigan individuals and families compare annuities alongside health insurance, Medicare, life insurance and retirement planning, all from one conversation. If you are turning 65, start with our Medicare page. For the full range of what we offer, including annuities, see our services. Our guidance is at no cost to you.
Have questions? We have answers! Contact us to schedule a no-obligation meeting.
- Contact: https://www.pbabiz.com/contact
- Call or text: 616-221-4616
- Meet on your terms: In Person • Phone • Virtual
FAQ
Is a MYGA better than a CD?
Neither is better in every case. A MYGA often pays a higher rate and defers taxes, but it is not FDIC-insured and carries surrender charges. A CD is better for short-term money you may need, and a MYGA is better for longer-term money you are confident you will not touch.
Are MYGAs safe?
A MYGA is backed by the issuing insurer's ability to pay claims, with a backstop from your state's guaranty association. In Michigan that backstop is up to $250,000 in present value of annuity benefits per person. Check the insurer's financial strength rating before you buy.
What happens when a MYGA matures?
Your guaranteed rate ends. You can usually renew at the current rate, move the money into another annuity through a tax-free Section 1035 exchange, or take the money out and pay ordinary income tax on the earnings. Decide a few months ahead, so you are not defaulted into a lower renewal rate.
Can I take money out of a MYGA early?
Often yes, but with limits. Many contracts allow about 10% a year without a surrender charge, and larger withdrawals before the term ends can trigger charges. If you are under 59½, you may also owe a 10% federal penalty on earnings, so confirm the terms before funding.
Does it cost anything to get help choosing a MYGA?
Not with us. Our advisors compare options with you at no cost, and the insurance company pays us if you enroll through us. You are never obligated to buy.
Sources
- What Is a Multi-Year Guaranteed Annuity (MYGA)? Annuity.org
- Annuities vs. CDs: Financial Experts Weigh In, Annuity.org
- Best MYGA Rates October 2026, Annuity.com
- Annuities, Investor.gov
- Updated Investor Bulletin: Variable Annuities, Investor.gov
- Michigan Life & Health Insurance Guaranty Association summary
- CDs vs. annuities, Investopedia
- MYGA explained, TIAA
- Buyer's Guide to Fixed Deferred Annuities, NAIC