MYGA's
As of 05/13/23 the highest yield to surrender rate in the industry for a 3-year MYGA is 5.40%
Why have MYGA's become so popular?
Multi-Year Guarantee Annuities (MYGAs) are also called fixed-rate annuities and are a specific annuity product type that functions similarly to a CD (Certificate of Deposit).
Both MYGAs and CDs contractually guarantee an annual interest rate for a specified period, have no annual fees and are fully principal protected.
Some of the key features and benefits that MYGAs contractually offer are listed below.
• No annual fees
• Contractually guaranteed annual interest rate
• Tax-deferred growth in non-IRA accounts
• Rates are typically higher than CDs
• Interest compounds tax-deferred in a non-IRA account
• Can be purchased inside of an IRA or non-IRA account
• Easy to understand
• No moving parts or market attachments
• Can be laddered like CDs and Bonds
• Full principal protection
• Can be transferred to another MYGA without tax consequences
Both MYGAs and CDs allow you to contractually lock in a specific annual interest rate for a duration of time you choose at the time of application. MYGAs can be as short term as 2 years and you can lock them in for as long as 20 years. (3 to 5 years seem to be the most popular)
MYGAs have no annual fees, no moving parts, and provide full principal protection while guaranteeing an annual interest rate. If you are a current CD buyer, then you should also be a MYGA buyer.
The primary difference between a MYGA (i.e. annuity contract) and a CD is that in a non-IRA (i.e. non-qualified) account, the MYGA interest grows tax-deferred with no tax penalty on the interest earned. With CDs in a non-IRA account, you must pay taxes annually on that guaranteed interest rate that is credited.
This tax-deferral benefit does not make MYGAs better than CDs, it is just the primary contractual difference between the two strategies. MYGAs can also be transferred from one MYGA to another in a non-IRA account, without creating any tax consequences.
In other words, that annuity to annuity transfer would be a non-taxable event using the IRS approved 1035 exchange rule. MYGAs inside of an IRA can also be transferred via a non-taxable event as well. That would be an IRA to IRA transfer and would not trigger any taxes.
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