What Is a MYGA? Multi-Year Guaranteed Annuities Explained
By Hans Goldstein, EA, founder, Retirement Literacy Foundation · Updated
Admitted to practice before the IRS.
How a MYGA works
- You deposit a lump sum. The insurer credits a stated rate every year for the term you pick.
- Interest compounds inside the contract with no tax until you withdraw it.
- At the end of the term you can take the money, renew, or move it to another annuity with a 1035 exchange.
- Most MYGAs let you withdraw some money each year without a charge (often the interest, or up to 10%), and charge a surrender charge on larger early withdrawals. The surrender period usually matches the rate term.
MYGA vs CD
| Bank CD | MYGA | |
|---|---|---|
| Backed by | FDIC up to $250,000 per depositor, per bank (FDIC, 2026) | The insurer, plus state guaranty association up to its limits |
| Tax on interest | Every year | Deferred until withdrawn, then ordinary income |
| Early exit | Interest penalty | Surrender charge, possibly a market value adjustment, and a 10% extra tax before 59½ |
| Typical terms | Months to 5 years | Often 3 to 10 years |
The RLF tracks how MYGA rates compare with CDs and Treasuries in its MYGA vs CD spread index. See also annuity vs CD.
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Taxes
Interest is taxed as ordinary income when withdrawn. In a non-qualified MYGA, withdrawals come out interest first. A MYGA can also be held inside an IRA, where the normal IRA and RMD rules apply. Details: how annuities are taxed.
What to compare
- The guaranteed rate and term, and what happens at renewal.
- The surrender schedule and free withdrawal amount.
- Whether there is a market value adjustment.
- The insurer's financial strength ratings and ownership: see who owns your insurer.
- The commission built in: MYGAs have paid the lowest published average among fixed annuities. See annuity commissions.
Common questions
Is a MYGA safe?
The rate and principal are guaranteed by the issuing insurer, not the FDIC. State guaranty associations back annuity owners up to limits if an insurer fails. The insurer's financial strength matters.
Are MYGA earnings taxable?
Yes, as ordinary income when withdrawn. Until then the interest grows tax-deferred.
What happens when a MYGA term ends?
You usually get a window, often 30 days, to withdraw without a charge, renew at the insurer's new rate, or move the money with a 1035 exchange.
Sources (checked October 10, 2026): FDIC (deposit insurance limit, 2026); IRS Publication 575, 2025 and IRS Topic 410 (annuity tax rules); National Organization of Life and Health Insurance Guaranty Associations (state guaranty limits).
Before you buy, read are fixed annuities safe: what the FDIC does and does not cover, and where the state guaranty limit stops.
Related
- Annuity vs CD
- MYGA vs CD spread index
- Annuity types, pros and cons
- Surrender charges
- All annuity education pages
More on annuities: How Do Annuities Work? A Plain-English Guide · How Are Annuities Taxed? · Inherited Annuity Taxes · 1035 Exchange · Annuities in an IRA · Annuity Surrender Charges and How to Get Out of an Annuity · Types of Annuities and Their Pros and Cons · Fixed Index Annuity Explained · Immediate Annuity (SPIA) Explained · Variable Annuity Explained · Annuity vs CD
Education only; nothing is sold here and no product is recommended. The Foundation's work is independent of any outside professional activity. RLF sells nothing and accepts no funding from financial companies. Tax rules depend on your situation; check with a tax professional before acting.
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Hans Goldstein, EA
Founder & Executive Director · Retirement Literacy Foundation, a 501(c)(3) non-profit
Admitted to practice before the IRS
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