It's Your Retirement Savings

A multi-year guaranteed annuity, or MYGA, is an insurance product that provides guaranteed interest rates for a set period of time. These contracts are typically funded with a single premium payment. The insurer will credit interest to your account value from the date of issue until the end of the guarantee period. They are long-term products and are subject to surrender charges and a holding period.

There are a number of important differences between MYGAs and other fixed-interest types of products. Various types of financial products may make sense for your needs and this is not intended to be a comprehensive comparison.

What's important to understand about MYGAs is that they are insurance products issued by an insurance carrier. Their guarantees are backed by the financial strength and claims-paying ability of the issuing company. They are not FDIC insured. They are long-term products and can be used to build retirement assets without premium risk that is typically associated with stocks, bonds or mutual funds.

Fully review any product details before making a purchasing decision.

The issuing insurance carrier is responsible for the guarantees. Guarantees are backed by the financial strength and claims-paying ability of the issuing carrier.

Generally, retirees over the age of 60 find the benefits of the product most attractive. Assets in a MYGA are not subject to market fluctuations as they are fixed insurance products. They can be used to generate a predictable stream of income. However, the premium can generally not be withdrawn prior to the end of the guarantee period without incurring a surrender charge and possible market value adjustment. Any consumer should carefully consider his or her financial situation and potential need for liquidity in the coming years before purchasing a MYGA.

Many carriers require a minimum of a $15,000 premium or transfer of assets to purchase a MYGA.

No. A MYGA generally provides a higher rate of interest than comparable products. However, any premium placed in a MYGA will be subject to penalty charges that decline over time and possibly a market value adjustment. Carefully consider your liquidity needs before purchasing a multi-year guaranteed annuity, or MYGA.

If you withdraw your entire contract value before the end of the guarantee period, a surrender charge and market value adjustment will typically apply and varies depending on the contract and when you make the withdrawal. You typically will not pay a surrender charge if you withdraw up to the amount of accumulated interest. Our company offers versions with and without this feature. Keep in mind that any withdrawals will reduce the contract value and the value of any contract benefits. Additionally, withdrawals are taxed as ordinary income and, if taken prior to age 59 1/2, a 10% federal tax penalty will apply. Before making a purchasing decision, it's important for you to understand exactly how the penalties, surrender charges, and holding periods apply to your specific annuity contract.

Yes, carriers will generally issue MYGAs to individuals from ages 0 to 85.

Some carriers include provisions that will allow you to withdraw some or all of your account value without penalty if a qualifying event occurs, for example if you were to suffer from a terminal illness.

Your age and other factors may impact eligibility for terminal illness benefits, so be sure to review product materials for details.

At the end of the guarantee period, you usually have the flexibility to continue for another period, based on the original guarantee period, or choose a new period with a different duration. At the end of each guarantee period, the carrier will typically declare a new interest rate for each new guarantee period. If the carrier receives no direction from you, the carrier will usually automatically renew your annuity for the same period at the then-current interest rate. If you would prefer to withdraw some or all of your account value at the end of any guarantee period, you will generally have a 30-day window to do so, free of any surrender charge or market value adjustment.

At the end of each guarantee period, your annuity will usually automatically renew into a new guarantee period at the then-current interest rate. Surrender charges may also be reset. Our product does not reset surrender charges.

You typically have a set number of days (at least 10) to look at the multi-year guaranteed annuity after you buy it. If you decide during that time that you don’t want it, you can return the annuity and get all of your premium back, less any prior withdrawals. Read the cover page of your annuity contract as soon as you receive it to understand how many days you have to decide if you want to keep it.

If you should die before the annuity date, your beneficiary will receive the account value of your annuity. Surrender charges do not apply at death. Any gain in the annuity would be subject to income tax. If you should die after the annuity date, any benefits payable to your beneficiary would depend on the income option chosen.

Annuities are tax-deferred, which means you don't pay taxes on the interest earned until you receive a distribution. When you take a withdrawal or begin receiving income, the distributions are subject to ordinary income tax. If withdrawals are taken, the distributions are taxed on a last in, first out (LIFO) basis, meaning withdrawals are made using earnings first, and the contract owner will be taxed on these payments until all the earnings have been distributed.

Buying an annuity within an IRA, 401(k) or other tax-deferred retirement plan doesn’t give you any extra tax benefit. Choose the annuity based on its other features and benefits as well as its risks and costs, not its tax benefits. Please consult your tax advisor regarding your unique situation.

The Internal Revenue Code provides that if a non-natural person holds the annuity and such person is not holding as an agent for a natural person, the contract shall not be treated as an annuity contract for income tax purposes.

Annuities can seem complicated, but so can planning for retirement. As challenging as it can be to build a retirement nest egg, it can be even harder to convert those assets into a predictable stream of income. Annuities can provide guaranteed interest rates and streams of income that can help you meet your retirement income needs. Make certain you understand how any annuity that you may purchase works, the benefits it provides and all restrictions on early withdrawals. Note that guarantees are based on the financial strength and claims-paying ability of the issuing carrier.