Best Multi-Year Guaranteed Annuity Rates (MYGA) for November 2024

GaudiLab / iStock.com

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

A multi-year guaranteed annuity can provide some of the retirement income you need to bridge the gap between Social Security and retirement savings. MYGAs also have tax benefits that help maximize that income and preserve your wealth. But with literally hundreds of policies to choose from, finding the highest MYGA rates can be tricky.

Best Multi-Year Guaranteed Annuity Rates

GOBankingRates has done the research for you and found the best MYGA rates today for a variety of contract terms.

Best 2-Year MGA Rates

The rates on these MYGAs are guaranteed for two years.

Best 3-Year MYGA Rates

Lock in a high rate for three years with these MYGAs.

Best 5-Year MYGA Rates

Here are the highest MYGA rates you can earn with a five-year contract.

Best 5-Year MYGA Rates

Receive these MYGA annuity rates for seven years, guaranteed.

Best 10-Year MYGA Rates

Ten years at these MYGA rates could give your nest egg a nice lift.

What Is a Multi-Year Guaranteed Annuity?

A multi-year guaranteed annuity is an insurance product that offers a guaranteed interest rate on your investment for a certain period of time, and then pays back your principal plus interest. In that sense, a MYGA is similar to a certificate of deposit. However, the MYGA’s growth is tax-deferred — you’re not taxed on the interest that accrues until you withdraw the money after the annuity matures.

One reason investors like MYGAs is that there’s no risk of losing your initial investment unless the insurance company goes under. Also, MYGAs provide a death benefit to your beneficiaries if you die after the payout period begins.

Because MYGAs pay a fixed rate of interest and all or most of the funds remain in the annuity until it matures, MYGAs belong to an annuity classification known as fixed deferred annuities.

How Does a Mult-Year Guaranteed Annuity Work?

When you take out a MYGA, you pay the insurance company a single, lump-sum premium, similar to the deposit you make when you take out a CD. You agree to not withdraw the money until the annuity matures. In return, the insurance company agrees to pay a guaranteed interest rate for the period of time specified in the contract. This period is called an accumulation period, and it might last as as long as 10 years.

The insurance company invests your money during the accumulation period to produce the guaranteed return. When the annuity matures at the end of the accumulation period, you can take out your initial premium plus the interest it earned, or you can roll the money over into a new MYGA contract — or, if the plan allows it, “exchange” the contract for another type of annuity.

How Are Multi-Year Annuities Taxed?

MYGAs are usually non-qualified, meaning you typically pay the premium from after-tax income. Because you’ve already paid tax on the money, you won’t be taxed again on that portion of your eventual payout. However, you will pay tax on the interest your premium earned when you receive the payout.

The IRS lets you further defer tax on the interest by exchanging the maturing contract for a new contract without taking the payout. This kind of transaction is called a Section 1035 exchange. The rules can be complicated, so it’s a good idea to discuss this strategy with a fee-based financial advisor to make sure your annuity qualifies and ensure that you receive the tax benefits you expect.

Can I Withdraw Money From My Deferred Annuity?

Technically, yes. Some MYGAs allow you to withdraw a small amount — usually just accrued interest — penalty-free under certain circumstances. However, if your plan doesn’t allow withdrawals, or you withdraw more than the plan allows, you’ll likely pay a surrender fee. How much that fee is depends on the contract, but the further you get into the contract, the lower the penalty is likely to be.

What Happens After the the Surrender-Penalty Period Ends?

You have a few options for what to do with your annuity when it ends. One is to do nothing, in which case the insurance company will probably automatically renew your contract for one year at current rates. Alternatively, you can take your payout; roll the contract directly into a new annuity in a Section 1035 exchange; or annuitize the funds by purchasing a new annuity that gives you a regular stream of income for the rest of your life.

What Happens to My Annuity When I Die?

If you die before your MYGA contract ends, your beneficiaries will receive a death benefit.

Advantages and Disadvantages of Investing in a MYGA

Some features of MYGAs make them worth considering for your portfolio, but they also have some drawbacks to consider.

Advantages

MYGAs offer the following benefits:

• You premium is always 100% safe. No matter what happens with the markets or interest rates, you can’t lose your initial investment.
• The rate is guaranteed for the term of the annuity, so you know exactly how much you’ll have at the end of the contract. That’s a definite plus for retirement planning.
• Tax on the interest your MYGA earns is deferred until you take the payout.
• Many MYGAs allow you to withdraw at least a small portion of your balance without penalty.
• MYGA’s provide a death benefit for your beneficiaries.

Disadvantages

If you’re considering a MYGA, these disadvantages might give you pause.

• You’ll pay a penalty, and perhaps reduce your annuity’s accumulated market value, if you withdraw more than the plan allows before the annuity term ends, or you withdraw money before age 59 and a half.
• Your money might earn a smaller return than you could get from riskier investments, such as stocks.
• Administrative fees can eat into your gains.
• MYGAs carry inflation risk — if the inflation rate is higher than your guaranteed interest rate, your money will lose purchasing power.
• Unlike CDs and other bank products, MYGAs are uninsured. You could lose your principal and earnings if the insurance company you contract with goes under.

Choosing the Right Term Length

The decision over which term to choose comes down to balancing growth and liquidity. If you have many years until retirement and cash you can afford to tie up, you might maximize gains by selecting a seven- or 10-year term. If there’s a chance you’ll need the money sooner, you might want to compromise on the rate in order to get a shorter term.

It’s a good idea to shop for the best combination of rate and term. Gainbridge FastBreak™ is an example of an annuity that has offered the best of both — the same competitive rate for terms of five to 10 years of up to , which is one of the highest rates available at this time.

MYGAs vs. Other Annuities: Which Is Right for You?

A MYGA is just one several types of annuities. Compare its features with features of other types to decide if a MYGA should have a place in your portfolio.

Single-Premium Annuity vs. Flexible Premium Annuity

MYGAs are single-premium annuities — you pay your premium as a single lump sump. A flexible premium, on the other hand, gets paid over time. That might mean slower appreciation, but it frees cash for other uses.

Deferred Annuity vs. Immediate Annuity

An MYGA is a deferred annuity because you don’t receive payments from it until it matures. The alternative is an immediate annuity, which usually has a lower rate but provides an income stream that begins shortly after you pay your premium.

Fixed Rate Annuity vs. Variable Rate Annuity vs. Indexed Annuity

As a fixed-rate annuity, a MYGA produces a predictable, guaranteed return.

One alternative to a fixed annuity is a variable annuity, which could earn you higher gains because your money is invested in securities, such as mutual funds. But unlike with a MYGA, you can lose your money if the investments lose value.

Your principal is safe with the third type — an indexed annuity, which provides a minimum guaranteed rate, plus returns tied to an index, such as the S&P 500. Indexed annuities usually cap earnings.

Fixed Term vs. Life Term

In addition to having a fixed rate, a MYGA has a fixed term. In the event of your death during the term of the contract, your beneficiaries receive accumulated or guaranteed funds. Not so with a lifetime annuity. With that type, you receive payments for the rest of your life, which means payments stop if you die.

Which of these annuity types is best for you depends in your overall financial situation, including tax liability and your retirement plans. A fee-based financial advisor can help you decide.

How Do You Purchase a MYGA?

An annuity is a contract that can have long-term consequences for your finances. Because it’s also a type of insurance policy, you can buy it from a properly licensed insurance broker, investment advisor or, in some cases, a bank. Here’s how:

1. Do your homework. Learn about MYGAs, and compare their features against other types of annuities to make sure they’re a good fit for your retirement plan. The Securities and Exchange Commission’s consumer website, located here, is a good place to start researching.
2. Define your goals for the annuity. Knowing exactly what you want to it do, and according to what timeline, will help you decide on how much to put in a MYGA and for how long.
3. Decide where to purchase the annuity. It’s always a good idea to at least consult with a fee-based financial advisor who won’t earn a commission if you buy.
4. Select the best annuity for your needs.
5. Submit an application to purchase the annuity.
6. Review the annuity quote. Make sure you understand the contract, including withdrawal limits, and any fees associated with it.
7. Pay the premium. This is a single lump-sum payment.

Is a MYGA Better Than a CD?

A MYGA could be a better choice if your goal is to defer taxes on your gains — CD interest is taxed in the year it accrues. Also, MYGAs typically earn higher rates than CDs. CDs, on the other hand, typically have no fees.

Are Guaranteed Annuities a Good Idea?

Guaranteed annuities can be good for the right investor. They’re meant to provide retirement income, so people age 60 and older are likely to benefit the most. If you’re in that age group and are already fully funding other tax-deferred retirement accounts, such as a 401(k) and individual retirement account — accounts that could have higher growth potential and lower fees — a MYGA might be a good choice. Rates are often higher than rates for other conservative investments, such as CDs, and because they’re guaranteed, you know how much you’ll receive at the end of the term. In addition, you can annuitize your funds after the MYGA ends and receive regular payments for the rest of your life.

The National Association of Insurance Commissioner recommends that you ask the following the questions before buying a MYGA:

• Do I understand the risks of an annuity, and am I comfortable with them?
• Do I understand the potential fees, charges and adjustments?
• Is there a limit on early withdrawals, and if so, might I need the funds before the contract ends?
• Am I taking full advantage of other tax-deferred accounts?
• How will the annuity affect my tax liability?
• How do I ensure my beneficiaries will receive payment from the death benefit if I die?

If the answers to these questions suggest that you’re ready to buy a MYGA, read the contract, the prospectus and any disclosures you receive before you sign. Look for a “free look” or “right to return” period that lets you back out of the contract within a certain period, usually within 30 days or less, if you decide it’s not right for you after all.

Takeaway

Finding and working with a financial advisor is a great idea. A financial advisor will help keep track of your finances and assist you in attaining your financial goals. While finding the right one can be overwhelming, you can decide to work with a financial advisor in your community or a virtual one.

Get to know your financial advisor options today for free!

Rates are subject to change. All other information on accounts is accurate as of Nov. 1, 2024.

Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.

Share This Article: