What Is a Multi-Year Guaranteed Annuity (MYGA)? Definition and Benefits

A multi-year guaranteed annuity (MYGA) offers a predetermined and contractually guaranteed interest rate for a fixed term. It can be a strategic way to create an additional savings bucket for retirement. In other words, this can help you supplement your Social Security benefits or any tax-advantaged retirement accounts you may have for a more secure retirement.

For guidance in building and maintaining a retirement plan, consult a financial advisor.

What Is a Multi-Year Guaranteed Annuity (MYGA)?

A multi-year guaranteed annuity is a type of fixed annuity.

As their name suggests, fixed annuities offer a fixed interest rate. The key difference between MYGAs and traditional fixed annuities is the length of time that the rate is guaranteed.

With a traditional fixed annuity, the guarantee may only last for part of your contracted term. For example, you might buy an annuity contract with a 10-year term, but your rate may only be guaranteed for the first five years. A MYGA, on the other hand, guarantees your rate for the entire contracted term, typically between two and ten years.

These annuities are also different than the other main type of annuity: variable annuities. A variable annuity is much closer to an investment account, as the money you deposit within it can be invested in funds that the annuity company offers. These funds typically vary in their risk levels, allowing the annuitant to choose where they feel most comfortable.

As you might imagine, an investment-based contract like a variable annuity holds much more risk than its fixed-rate and MYGA counterparts. This is the primary reason for a MYGA over a variable annuity. For instance, if your annuity is meant to supplement your existing retirement income, then the risk associated with a variable annuity may not be worth it for you, even if that variable annuity can attain higher potential returns.

Benefits and Drawbacks of MYGAs

There are several reasons why you might prefer a multi-year guaranteed annuity over another type of annuity.

Since a MYGA offers a guaranteed interest rate for the entire contracted term, it’s considered a less risky investment than a variable or indexed annuity. The rate of return on variable and indexed annuities is tied to stock market performance; therefore, while the reward potential is higher, so is the risk. Additionally, the interest earned with a MYGA is tax-deferred, meaning you won’t owe taxes on growth until you begin taking distributions.

It’s possible to purchase a MYGA using qualified or non-qualified funds.

Qualified annuity. With a qualified annuity that’s purchased through an IRA or another tax-advantaged account, you pay income tax on principal and interest when making withdrawals.
Non-qualified annuities. With non-qualified annuities, only the interest is taxable.

There is great flexibility in the ability to take penalty-free partial withdrawals each year.

For example, if you need money to cover a large medical bill, you could pull it from your MYGA. This could serve as a more preferable option than incurring IRA withdrawal penalties or interest from a 401(k) loan. Even with a regular CD, you still have to contend with early withdrawal penalties that require you to forfeit some of the interest earned.

A MYGA does come with its share of fees, but they can be less than other annuities. Generally, the rule of thumb for annuities is the less complicated they are, the fewer fees you pay.

MYGAs vs. CDs

Multi-year guaranteed annuities are often associated with certificates of deposit, as they’re extremely similar.

A CD requires you to stash away your money for a specific period. Once the CD reaches its maturity date, you can renew it at the current interest rate, or you can withdraw your initial deposit, along with the interest earned.

You may also be able to renew a MYGA at the end of your contract, but it will likely be at a new interest rate. As with CD rates, you’ll be offered the current rate at time of renewal, which could be higher or lower than what you had before.

If you choose not to renew your MYGA with a new contract, you could instead withdraw the principal and interest. Your annuity company may allow a penalty-free window to do so, in which you wouldn’t pay any surrender charges or other fees. Within that window, you could also transfer the money into a new, higher-yielding annuity using a 1035 exchange without triggering a tax penalty.

That said, there are several key differences between MYGAs vs. CDs.

MYGAs vs. CDs

	MYGA	CD
FDIC Insurance	✘	✔
Availability	Insurance company	Bank or broker
Early Withdrawal Penalty	Partial withdrawal permitted	✔
Interest Rates	More competitive	Less competitive
Fees	Generally higher	Generally lower
Taxable Interest	✘	✔

What to Know Before You Purchase a MYGA

If you’re contemplating a MYGA for retirement, there are a few things to keep in mind.

Age. First, consider your age. MYGAs can be better suited to people nearing retirement versus younger savers. If you’re still several decades away from retirement, you may find better returns from an IRA or your company’s 401(k) plan.
Purpose. Next, think about what you want an annuity to do for you. A MYGA may not be the right choice if you’re looking for an annuity product to create consistent income for retirement.
Returns. Third, consider the return potential. MYGAs are by nature designed to offer more conservative returns. That could make it harder for them to keep pace with rising inflation. If you’re interested in an annuity and you’re comfortable trading a higher degree of risk for the chance for more growth on your investment, another type of annuity may be a better fit.
Insurer. You should also research the financial stability of the insurance company that sells the MYGA. Look for insurers with high ratings from independent rating agencies, as this indicates their ability to meet future obligations.
Withdrawals. Lastly, be sure you understand the withdrawal options and penalties associated with the MYGA. Some annuities offer penalty-free withdrawals under certain conditions, providing added flexibility.

How MYGAs Fit Into a Retirement Savings Strategy

A multi-year guaranteed annuity often sits between growth-oriented investments and income-focused products. It is typically used to park money that an investor does not want exposed to market swings but also does not need immediate access to. In that sense, a MYGA functions as a stability-focused allocation rather than a primary growth engine or a lifetime income source.

MYGAs are commonly evaluated alongside assets such as CDs, money market funds and short-term bonds. Unlike market-based investments, the return is known upfront and does not change during the contract term. This makes MYGAs easier to coordinate with other retirement assets that fluctuate in value, such as 401(k)s or brokerage accounts, where balances rise and fall with market conditions.

From a planning perspective, MYGAs are often paired with accounts that serve different roles. Tax-advantaged retirement accounts may be used for long-term growth, while a MYGA can hold funds intended for future spending needs within a defined time window. This separation allows investors to align specific dollars with specific time horizons rather than treating all retirement assets the same way.

MYGAs are also sometimes used to manage reinvestment risk. By locking in a rate for several years, the contract removes uncertainty around future interest rate changes for that portion of a portfolio. This can simplify planning for upcoming expenses or future income decisions, especially when combined with other assets that reset or reprice more frequently.

Bottom Line

Multi-year guaranteed annuities can be used as a substitute for CDs in your financial plan or you can invest in them alongside a CD. They offer a potentially safer way to invest for the future while allowing you to benefit from favorable tax treatment when you begin withdrawals.

However, a strong retirement plan needs to include more than just an annuity. It is critical that you diversify your assets between tax-advantaged accounts like traditional and Roth IRAs, as well as working to maximize your Social Security benefits, so you can attain a complete retirement plan.

Retirement Planning Tips

Consider talking to a financial advisor about whether an annuity is right for you. They can guide you through the basics of how annuities work and what purpose they could serve in helping you reach your financial goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
When comparing annuities, be sure to check the fees and the rating of the insurance company selling it. Some annuities can come with expensive hidden fees, which take away from your returns. It’s also important to work with a reputable insurance company. This reduces the risk of the insurer going out of business and not being able to pay you once you’re able to withdraw from the annuity.