A dependable strategy can help your long-term financial plans flourish.

By a financial services industry contributor.

Planning for retirement can feel like a choice between growing your money and keeping it safe. You want your savings to grow, but the stock market’s ups and downs can be scary. This is especially true when you need a steady, reliable income. This basic challenge is a big deal in the world of finance. In just the first nine months of 2024, total U.S. annuity sales grew 23% to an impressive $331.2 billion, according to LIMRA, a research group for the insurance industry.

This increase in sales isn’t about people taking big, complicated risks. Instead, more people want financial tools they can count on. For many careful investors, this means looking into Multi-Year Guaranteed Annuities, or MYGAs. These are simple insurance contracts. Their main job is to give you a guaranteed interest rate for a set number of years. To find the right one, you can compare the best guaranteed multi year annuities. You’ll need to match their fixed rates and terms to your own financial timeline and how much risk you’re comfortable with. Think of it as finding a dependable, even “boring,” part of a balanced savings plan.

Quick answer: A Multi-Year Guaranteed Annuity (MYGA) is a type of fixed annuity that guarantees a set interest rate for a specific number of years, usually 3 to 10. It works a lot like a certificate of deposit (CD) but comes from an insurance company. It offers tax-deferred growth, meaning your earnings can grow without being taxed each year.

What’s inside

•       How Do MYGAs Differ From CDs or Bonds?
•       What Key Contract Terms Should You Check?
•       Who Is the Ideal Candidate for a MYGA?
•       Frequently Asked Questions About Guaranteed Annuities
•       The Final Verdict on Guaranteed Returns

 

How Do MYGAs Differ From CDs or Bonds?

The main differences are about who offers the product, how your earnings are taxed, and the rules for getting your money. All three are safe financial tools, but a MYGA is an insurance contract. It’s not a bank deposit like a CD or a loan to a company like a bond. This difference is what gives it special features and a unique place in a retirement plan.

A Certificate of Deposit (CD) is offered by a bank and insured by the FDIC up to certain limits. A bond is a loan you make to a government or a company. A MYGA, on the other hand, is offered by an insurance company and is backed by that company’s money. It also has another layer of protection from state guaranty associations. The market for these products is large, with total sales reaching $434.1 billion in 2024, according to LIMRA’s U.S. Individual Annuity Sales Survey. This shows that many people want products backed by insurance companies.

❝ The most important thing behind a guarantee is the financial strength of the company making the promise. Before you commit, ask for the insurer’s rating from a group like A.M. Best or S&P. A high rating (like A or better) shows the company is very likely to meet its long-term promises to customers.

The biggest difference is how they are taxed. Interest you earn in a CD or a bond is usually taxed as income in the year you earn it. But with a MYGA, the interest grows tax-deferred. You don’t pay taxes on the earnings until you take the money out. This allows your money to grow faster because you aren’t losing a piece to taxes each year.

Finally, the rules for accessing your money are different. If you take money out of a CD early, you usually pay a penalty of a few months’ interest. If you sell a bond early, you get whatever the market price is that day, which could be more or less than you paid. MYGAs have “surrender charge periods” that match the guarantee term. If you take out more than a certain amount (often 10% a year) during this time, you will pay a penalty. They are meant to be long-term savings tools, with payout periods that can last for a fixed term, such as 20 years, or even for a lifetime, as noted by the U.S. Securities and Exchange Commission.

 

What Key Contract Terms Should You Check?

When you look at a MYGA contract, don’t just focus on the interest rate. You also need to check the insurance company’s financial health, the surrender charge schedule, and the rules for withdrawals and death benefits. These details affect how the product really works for you. The contract is the real agreement that controls your money, not the sales brochure.

First, check the financial strength of the insurance company. The “guarantee” in a MYGA is only as good as the company behind it. Look for ratings from independent groups like A.M. Best, Standard & Poor’s (S&P), or Moody’s. An ‘A’ rating or higher means the company is in a strong position to pay its bills. State guaranty associations offer a safety net, but you should think of them as a last resort. It’s better to choose a strong company from the start.

Next, understand the surrender charge schedule. These are penalties for taking out too much money before the guarantee period is over. The charges are usually a percentage of the money you withdraw, and they go down each year. A common five-year MYGA might have a schedule like this:

Contract Year	Surrender Charge
1	9%
2	8%
3	7%
4	6%
5	5%
6+	0%

This is a hypothetical example. Your contract’s schedule will be specified in the policy.

Most MYGAs let you access some of your money. Look for a “free withdrawal” option, which often lets you take out up to 10% of your account value each year without a penalty. Some contracts also have special rules that let you get all your money without surrender charges for certain reasons, like a serious illness or needing to go into a nursing home.

❝ When looking at withdrawal options, ask the agent or company a direct question: “What is the exact process for taking out money without a penalty, and are there any limits on how many times I can do it each year?” The answer can tell you important details that aren’t always clear in the marketing papers.

Finally, check the death benefit. The standard rule is simple: if you die, the person you named as your beneficiary gets the full account value with no surrender charges. This makes sure your original investment and all the interest it earned is passed on. Because different companies offer these products, contract features can vary. It’s important to review your specific policy carefully.

 

Who Is the Ideal Candidate for a MYGA?

The best person for a MYGA is a careful investor. They want to protect their original investment and get a predictable return for a set period of time. It’s often one part of a larger retirement plan. This person is usually looking for a safe place for some of their money. They want to protect it from the stock market’s ups and downs and get tax-deferred growth.

This type of product often appeals to three kinds of people:

1.     The Pre-Retiree: If you are 5 to 10 years away from retiring, you may want to lower the risk in your savings. Moving some money from stocks into a MYGA can lock in your gains and build a stable base for your future income. It acts like a bridge, giving you security during a key time when you can’t afford a big market drop.
2.     The Risk-Averse Saver: Some people just don’t like the ups and downs of the market, no matter their age. For them, a MYGA is a simple choice instead of a savings account or CD. They like the guaranteed return and the peace of mind that their first investment is safe, backed by the insurance company.
3.     The CD Alternative Seeker: If you use CDs but don’t like paying taxes on the interest every year, a MYGA can be a great option. The tax-deferral feature lets your interest earn more interest without a yearly tax bill. This can lead to more growth over the life of the contract.

❝ A common mistake is to think all MYGAs are the same and just pick the one with the highest rate. A slightly lower rate from a top-rated insurance company with better withdrawal options is often a much better value in the long run than a slightly higher rate from a company that is not as strong.

On the other hand, a MYGA is usually not the right choice for a young investor who has a long time to save and needs to grow their money as much as possible. The fixed, steady returns will likely not grow as much as stocks over many years. It’s also not for someone who might need to get all their cash out right away. The surrender charges are large and are there to make sure it’s used as a long-term contract. The key is to see it as a tool for stability in a diverse financial plan, not as your main way to grow wealth.

 

Frequently Asked Questions About Guaranteed Annuities

What are the top multi-year guaranteed annuity rates? Rates change daily based on the economy and financial markets. Instead of looking for one specific number, you should see how a rate compares to other choices like CDs with the same time frame. You can usually find the best rates by comparing offers from several top-rated insurance companies when you are ready to buy.

Are multi-year guaranteed annuities a good investment? Whether they are a good choice depends on your financial goals. If your main goal is to protect your money from market losses and get a predictable, guaranteed return for a few years, a MYGA can be a great tool. But if you want high growth or need to access all your money quickly, other investments would be a better fit.

How much income will a $100,000 annuity provide? This question points to a common mix-up. A MYGA is made for saving and growing money, not for providing immediate income. Your $100,000 would grow at the guaranteed interest rate for the length of the contract. At the end of the term, you could use the new, larger amount to buy a different product that provides monthly payments.

What does Warren Buffett think about annuities? Warren Buffett has warned people about complex, high-fee financial products that are often sold with confusing terms. He is not known for endorsing annuities specifically, but he tends to prefer simple financial products that are easy to understand and do what they promise without high fees.

What happens if the insurance company that issued my MYGA fails? Your annuity is protected by a state-level safety net called a State Guaranty Association. If your insurance company can’t pay its bills, this group will step in to help cover customer claims up to a certain limit, which is different in each state. While this is an important backup, your first line of defense should always be to pick an insurer with a high financial strength rating (like ‘A’ or better) from the start.

 

The Final Verdict on Guaranteed Returns

A Multi-Year Guaranteed Annuity is not designed to make you rich by beating the stock market. Instead, it’s a financial tool made for one main job: to keep your money safe and give you a predictable, guaranteed return. Its main benefit is taking some of your savings out of the unpredictable stock market. For people who want security for a certain amount of money over a set time, this clarity is the product’s greatest strength. This is especially true for those lowering their risk as they get close to or enter retirement.

The most important decision is not just finding the highest rate. You need to look deeper. You have to balance the interest rate with the financial strength of the insurance company that makes the promise. A slightly lower rate from a top-rated insurer with flexible withdrawal options can provide much more value and security than a slightly higher rate from a less-established company. The contract’s details, especially the surrender charge schedule, control how easily you can access your funds.

In the end, a MYGA should be judged by how well it fits into your overall financial plan. It is a tool for keeping your money safe while it grows steadily without being taxed each year. If you have money that must be protected from loss while earning a fair, fixed return, it is worth looking into. The right question is not “Is this a good investment?” but rather, “Is this the right tool for this specific financial job?”

 

About the author

Annuity Advantage is an independent online marketplace providing educational resources and real-time rate comparisons for fixed annuity products. The firm offers access to a broad network of insurance carriers, helping individuals and financial professionals research and select products like MYGAs and income annuities that align with specific retirement planning goals. As an independent agency, their work centers on matching client needs for protecting savings and predictable income with suitable annuity contracts.