What is a MYGA and When You Should Lock or Ladder

You may want to buy a MYGA if you're looking to protect your principal, not pay any fees annually, there are no moving parts, there are no market attachments, you're just going to get an interest rate contractually for the specific period that you choose.

What is a MYGA?

MYGA stands for Multi-Year Guarantee Annuity. In English, it means fixed-rate annuity. A Multi-Year Guarantee Annuity is the annuity industry version of a CD. They work pretty much the same. It's a contractual annual yield for a specific time that you choose. The difference between a Multi-Year Guarantee Annuity and a CD is the fact that within a non-IRA account, non-qualified like your savings or checking account, the interest grows tax-deferred. If you bought a CD in that non-IRA account, you must pay taxes on that interest every year.

Another difference between MYGAs and CDs is, Multi-Year Guarantee Annuities are backed at the state level by state guarantee funds. CDs are backed by FDIC insurance, Federal Deposit Insurance Corporation, which is the best insurance of your money. Also, you can combine it with CD purchases to create some pretty interesting and efficient contractual ladders as well.

How does a MYGA work?

MYGAs work just like CDs. You put the money in and choose how long you want to lock in your rate. With CDs, you can lock it in even short term, six months, 12 months, 18 months, whatever.

Multi-Year Guarantee Annuity works the same. You put a lump sum in and it's locked in for a specific period that you choose. The time frames are generally from 2 – 10 years.

We have a live feed of the best MYGA fixed rates for your state. MYGAs are fixed annuities, which means they're regulated at the state level. So we can show you the best three-year, or the best four-year, the best five-year, etc. You choose your state and the rate lock period, and you'll see the best MYGAs out there, the best fixed-rate annuities out there.

So if you're tired of the market volatility and you just want to park some money, not pay any annual fees, get a guaranteed annual interest rate and in a non-IRA account, have the money grow tax-deferred, then a Multi-Year Guarantee Annuity might be something worth looking into.

What is a good rate for a fixed annuity?

It depends on the duration. You need to shop all carriers and we have that live feed at theannuityman.com, where you can shop all carriers for the highest yield for your specific state and the duration that you're looking at.

What is the length of the typical window in a Multi-Year Guaranteed Annuity?

Some carriers offer guarantees as long as 15 and 20 years.

MYGAs are like CDs. You can purchase some as short term as two years and as long term as 10 years. Some carriers offer guarantees as long as 15 and 20 years. Obviously, the shorter the contractual guarantee period, the lower the interest rate. Conversely, the longer that you lock in the money, typically the higher the interest rate.

But, that's not always true. Sometimes you will see the five-year and the 10 year kind of mirror themselves from the standpoint of yield, which is kind of the yield curve analysis of where the best value is for your money, how far out should you lock that money in? Typically, I would say you want to lean toward that five-year. If you're going to go out farther, you might go seven. If you say, "Stan, I don't care. I just want to lock the money in." You can go out to 10. But I'd say from three to seven is the window right now for a typical Multi-Year Guarantee Annuity purchase.

And just to throw another little idea in there, you don't have to just buy one, you can ladder them.

In other words, if you have $300,000, we might look at a three year, a five year and a seven-year each with $100,000 each to ladder that purchase so that you have money coming due, starting in year three to hopefully move to a higher interest rate at that time.

If you are familiar with CDs, you already like the idea of a guaranteed rate. MYGAs offer that same guaranteed rate, with the added benefit of tax-deferral for non-IRA funds. If you want to guarantee a rate on a portion of your portfolio, MYGAs are worth looking at.