How MYGAs Work
A MYGA is a type of annuity (a contract with an insurance company) that guarantees a fixed interest rate for a set number of years. It is like a certificate of deposit (CD), but instead your growth is tax-deferred, which means that you don't pay taxes until you withdraw.
Step 1: You contribute a lump-sum investment amount.
Step 2: Your investment then grows tax-deferred at a guaranteed fixed rate for the time period selected.
Step 3: Once the annuity matures, you have a few options:
- You can auto renew with the same insurance carrier.
- You can transfer the money into a different MYGA or annuity product. (1035 exchange)
- You can cash out your funds. (tax implications)
Today's Best MYGA Rates
Rates vary by provider, state, investment amount, and contract length, and also change with market conditions. With Blueprint Income, you can compare current MYGA rates and filter through available options by what matters most to you.
You can also connect with a licensed annuity specialist who can answer any questions.
Best Fixed Annuity Rates by Term
| TERM | INSURER | RATING | Rate (APY) |
|---|---|---|---|
1 Year |  ELCO Mutual | B++ | 3.50% |
2 Years |  CL Life | B++ | 5.15% |
3 Years |  Wichita National | B+ | 5.85% |
4 Years |  Oceanview | A | 5.35% |
5 Years |  Knighthead Life | A- | 6.30% |
6 Years |  American Gulf | B++ | 6.00% |
7 Years | Knighthead Life | A- | 6.50% |
8 Years |  Equitrust | B++ | 5.40% |
9 Years |  Liberty Bankers Life | A- | 5.46% |
10 Years |  Farmers | B++ | 6.05% |
10 Years | Wichita National | B+ | 6.05% |
Best Fixed Annuity Rates by Term
1 Year
INSURER
ELCO Mutual
Rating
B++
Rate (APY)
3.50%
2 Years
INSURER
CL Life
Rating
B++
Rate (APY)
5.15%
3 Years
INSURER
Wichita National
Rating
B+
Rate (APY)
5.85%
4 Years
INSURER
Oceanview
Rating
A
Rate (APY)
5.35%
5 Years
INSURER
Knighthead Life
Rating
A-
Rate (APY)
6.30%
6 Years
INSURER
American Gulf
Rating
B++
Rate (APY)
6.00%
7 Years
INSURER
Knighthead Life
Rating
A-
Rate (APY)
6.50%
8 Years
INSURER
Equitrust
Rating
B++
Rate (APY)
5.40%
9 Years
INSURER
Liberty Bankers Life
Rating
A-
Rate (APY)
5.46%
INSURER
Farmers
Rating
B++
Rate (APY)
6.05%
10 Years
INSURER
Wichita National
Rating
B+
Rate (APY)
6.05%
Not all insurers and rates are available in all states
How to Compare MYGAs
There are three important considerations when selecting a MYGA:
Guaranteed Rate
This is the effective annual rate that your money is guaranteed to grow during the investment term, assuming you hold the contract to the end of the term.
Insurer Rating
An insurer's financial credit rating measures their financial strength and ability to meet future obligations. The rating indicates the credibility and ability an insurance company has to repay any claims to customers. Our site uses the ratings of A.M. Best, which specializes in the insurance industry. We only offer carriers with a rating of B or better.
The A.M. Best rating categories are as follows:
A+, A++ are a superior rating
A, A- are an excellent rating
B+, B++ are a good rating
B, B- are a fair rating
C-D ratings are rated marginal to poor
Investment Term (Contract Length)
Terms range from 1 to 10 years. During that period of time, you'll receive a guaranteed rate but will have limited access to your funds. Generally speaking, the longer the contract term, the higher the rate; however, there may be some exceptions to this rule based on the availability of some intermediate terms.
MYGAs vs. CDs
MYGAs operate very similarly to CDs. The key difference is in how growth is taxed and how the funds are protected. CDs are insured by the FDIC and taxed annually, while MYGAs are backed by the issuing insurance company (and state guaranty associations) and offer tax-deferred growth. Learn more.
FIXED ANNUITY
CD
SOLD BY
Insurance Companies
Banks
AMOUNT YOU CAN INVEST
$2,500 - $3,000,000
Virtually any denomination
INVESTMENT TERM
1 - 10 years
3 months - 5 years
INTEREST RATES
Vary by investment term and size, but typically higher than CD rates
Vary by investment term and size, but typically lower than fixed annuity rates
TAXES
Taxes on interest gains are deferred until money is withdrawn
Interest gains are taxable annually as they are earned
ACCESS TO FUNDS
Typically a portion of the account balance will be available for withdrawal annually, but a 10% IRS penalty is imposed for withdrawals before age 59½
Typically there is not free access to the account balance
FINANCIAL PROTECTION
Backed by the issuing insurance company
Insured by FDIC
SOLD BY
FIXED ANNUITY
Insurance Companies
CD
Banks
AMOUNT YOU CAN INVEST
FIXED ANNUITY
$2,500 - $3,000,000
CD
Virtually any denomination
INVESTMENT TERM
FIXED ANNUITY
1 - 10 years
CD
3 months - 5 years
INTEREST RATES
FIXED ANNUITY
Vary by investment term and size, but typically higher than CD rates
CD
Vary by investment term and size, but typically lower than fixed annuity rates
TAXES
FIXED ANNUITY
Taxes on interest gains are deferred until money is withdrawn
CD
Interest gains are taxable annually as they are earned
ACCESS TO FUNDS
FIXED ANNUITY
Typically a portion of the account balance will be available for withdrawal annually, but a 10% IRS penalty is imposed for withdrawals before age 59½
CD
Typically there is not free access to the account balance
FINANCIAL PROTECTION
FIXED ANNUITY
Backed by the issuing insurance company
CD
Insured by FDIC
MYGA State Guarantees
Any guaranties made by an insurance company are subject to the financial strength of the insurance company and their claims-paying ability. A state guaranty fund is administered by each U.S. state to protect insurance policyholders who reside in that state at the time the insurance company defaults on benefit payments or becomes insolvent. This should not be thought of as a substitute for FDIC insurance, which annuities do not have. If you own an annuity, the state guaranty fund for the state where you reside protects your benefits up to set limits, and those fund rules vary state-by-state. Learn more.
You can also find more state-specific information via the National Association of Insurance Commissioners.
Withdrawals and Taxes on MYGAs
Withdrawals
Some MYGAs (generally those paying the highest rate) do not allow for any withdrawals during the guarantee term without a surrender charge. Surrender charges vary, but can be as high as 9% in year one and typically decline to 0% at the end of the guaranteed rate period. Some contracts will have a new surrender charge schedule once the rate matures if no action is taken. It's also important to consider if your money is subject to a market-value adjustment (MVA), which means the withdrawal charge will be adjusted based on the change in interest rates between purchase and the decision to withdraw.
Other MYGAs allow for penalty-free withdrawals of interest earned; however, this is sometimes restricted in the first year. Still other MYGAs allow for withdrawals of up to 10% per year of the beginning balance at the start of the year. This will be broken down for you on the product details page of any annuity.
Note that any interest withdrawals made prior to age 59½ will incur a 10% penalty from the IRS. The IRS treats all withdrawals from a MYGA on an interest-first basis.
Taxes
If the MYGA is purchased with qualified funds (pre-tax income, usually in the form of a contribution to a retirement plan), then a MYGA doesn't provide any additional tax benefits beyond what the retirement fund offers, which is tax-deferral of gains until money is withdrawn. Qualified-funded annuities may also be subject to required minimum distributions (RMDs) starting at age 73.
If the MYGA is being purchased with non-qualified funds (post-tax dollars, money that has already been received through income sources and income tax has been paid), let's dig deeper into the tax treatment at each phase of the contract:
Taxes During the Term
There are no taxes due during the contract term. Your money isn't subject to taxation while it's growing. Not paying taxes means that you're able to keep more money invested and earning interest. And this benefit continues as long as you keep your money in the contract, which can be beyond the end of the initial guaranteed interest rate term.
Taxes on Withdrawals
Instead, you pay taxes once money is withdrawn, be that during, at the end of, or after the initial interest rate term of the contract. Only the interest gain portion of your withdrawal will be taxable at ordinary income rates. This differs again from when a MYGA is purchased with qualified funds, in which case, all withdrawals will be taxable. Waiting until you're in retirement, or in a lower tax bracket, to withdraw can reduce the taxes you owe. Note that you may be subject to a 10% penalty if you withdraw money before age 59½, or surrender charges if you withdraw more money than allowed prior to the end of the investment term.
Rolling Over with a 1035 Exchange
You can continue your tax-deferral by staying with your annuity, or by rolling over your MYGA into a new annuity. You can choose to roll it over into another MYGA or a different type of annuity through a tax-free 1035 exchange.
It's important to understand the tax implications of MYGAs and work with a tax professional to develop a plan that helps to minimize your tax burden.
Need help?
Schedule a call with one of our annuity specialists to learn about your options and determine which annuity may be right for you. Also see our full list of FAQs.
For assistance with your online experience, please call (888) 867-7620.