MYGA is short for Multi-Year Guaranteed Annuity and is a type of fixed annuity.
A MYGA has a fixed interest rate that is applied to invested funds for multiple years in a row. MYGAs are kind of like bank CD’s (certificates of deposit) in many ways. One similarity of MYGA’s to CDs are that they grow funds at a fixed interest rate for a set period of time and have a penalty for early withdrawals. MYGA’s are some of the simplest forms of annuities.1
A Withdrawal Provision is a feature of almost all MYGA’s. (Although there are some exceptions in some MYGA’s that do not allow penalty free withdraws until full maturity, but most MYGA’s do offer up to 10% withdrawals per year that are penalty free.) The Withdrawal Provision allows you to withdraw a percentage of your account value. For example, if a MYGA had a 10% Free Withdrawal Provision at the end of each year you could withdraw up to 10% of your account value each year penalty free. If you withdraw more of your money earlier then the MYGA agreement allowed, then you would have to pay substantial surrender charges to the insurance company, as well as possible tax penalties. (Withdrawal of any funds prior to age of 59 1/2 are subject to an IRS Penalty of 10% of the funds withdrawn. This is in addition to any penalties incurred as part of the annuity contract.)
MYGA’s are usually purchased by people in retirement or nearing retirement. The reason why MYGA’s are typically purchased by people older than 55 is because of the tax treatment of annuity funds mentioned above.
MYGA’s have several strengths over bank CDs. Probably the most significant strength is that their fixed interest rates tend to be quite a bit higher for MYGA’s than for CD’s of the same number of years. Another key advantage is that MYGA’s grow funds on a tax-deferred basis. That means you do not have to pay taxes on gains each year. With MYGA’s, funds grow tax-deferred within the annuity and no taxes are due until your funds are withdrawn. However on the other side with CD’s, you are taxed each year on the interest earned.
How do you buy a MYGA? Since MYGA’s are insurance products, they may be purchased through a licensed insurance agent. You can call me directly at 941-404-5334 if you like to purchase a MYGA or if you just have any questions.
1. Disclosures: I have provided this information as courtesy service. The material on this page for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law, please consult with an attorney.
An annuity is an insurance product that can be used as part of a retirement strategy. Annuities are not FDIC insured, not bank guaranteed, and may lose value if surrendered early. An annuity is subject to the claims-paying ability of the issuing insurance company. Before buying an annuity, consider the objectives, risks, charges, and expenses of the annuity. Please read all disclosures carefully before buying an annuity. Please review your issued annuity policy during any “free look” term offered by the insurance carrier to ensure accuracy.
Source: http://www.montanalifegroup.com/2014/05/myga
Note: Annuities can be confusing to many people. As an "independent licensed agent" I try to explain things to you in simple terms so you feel comfortable making a decision. Then I can help you choose an annuity that you feel best fits your needs from a large choice of different insurance companies. Plus if you choose to work with me you will have personalized service by a local independent agent that can shop rates for you, rather than working with a captive agent working for just one insurance company. If you would like my assistance to discuss and/or start the process of getting an annuity please call me at 941-404-5334.