multi-year guaranteed annuity

What Is a Multi-Year Guaranteed Annuity?

September 29, 2023

In a world where financial security in retirement is paramount, annuities have emerged as a powerful tool for achieving this goal. Annuities are financial products designed to provide a regular income stream. They come in various forms. In this article, we will explore the multi-year guaranteed annuity and its features, benefits, and suitability for different individuals in their retirement planning journey.

Understanding MYGAs

A multi-year guaranteed annuity (MYGA) is a retirement savings product that emphasizes the accumulation of assets over a set period — five years, for example. This phase provides a secure means for individuals to build and safeguard their retirement nest egg, earning a fixed interest rate and tax-deferred guaranteed account value.

After each accumulation period, individuals may roll the MYGA into a new annuity with another guaranteed interest rate period — often at a higher rate — and lock in continued compounded annual growth.

Key Benefits of MYGAs

MYGAs also offer distribution options even while accumulating assets. For example, MYGAs offer access to funds and withdrawal of 10% of the contract after the first year without withdrawal penalties.

However, MYGAs focus on the accumulation of compounded earnings. They’re well-suited to those with a lower risk appetite who want to lock in a positive fixed return in blocks of five years.

Guaranteed Income

MYGAs preserve the initial investment regardless of market fluctuations. This feature provides a level of security that aligns with the risk tolerance of individuals who seek a stable and secure retirement strategy.

Tax-Deferred Growth

MYGAs offer tax benefits, including tax-deferred growth, meaning individuals won't incur taxes on the earned interest until they begin receiving payments. This tax advantage can enhance the overall growth of the investment over the accumulation period.

Competitive Interest Rates

In addition to principal protection, MYGAs often offer competitive interest rates, outperforming traditional savings accounts. They’re an attractive option for those looking to earn substantial interest on their investment while maintaining a low-risk profile.

Who Should Consider MYGAs?

These funds are well-suited for a specific audience and certain financial scenarios. Individuals who prioritize the preservation of their principal and want a steady, guaranteed income in retirement should consider MYGAs.

They are also an excellent choice for those looking for a reliable source of income to cover their living expenses in retirement. You may want a MYGA if you prefer financial stability and steady growth potential.

Great candidates for MYGAs include:

  • Risk-averse investors who prefer a stable and predictable income stream without exposure to market volatility
  • Those approaching retirement who want to secure their accumulated savings and prepare for a steady income stream in the future
  • Those who wish to optimize their tax strategy in retirement through tax-deferred growth

Is a MYGA Right for You?

MYGAs present a valuable option for individuals seeking a secure and structured approach to retirement planning. By focusing on accumulation and offering guaranteed income, principal protection, tax-deferred growth, and competitive interest rates, MYGAs cater to the needs of risk-averse investors and those aiming to build a reliable financial foundation for their golden years.

It is essential to remember that MYGAs, like any financial product, have pros and cons. Before making any decisions, it's crucial to seek professional financial advice tailored to your circumstances and goals.

A MYGA may be the perfect addition to your retirement strategy, but the right choice depends on your unique financial situation. Ultimately, the path to financial security in retirement is as diverse as each individual's journey, and professional guidance can help you navigate it with confidence and success.

About 1891 Financial Life

At 1891 Financial Life, we don’t just sell policies, we offer possibilities. We pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help us to continue the good works that we do in the community.

Our mission is to provide products and benefits that assist individuals and their families in achieving financial security, while helping to build strong communities by supporting volunteer programs that reflect common shared values. In 2023, 1891 Financial Life was  listed by Forbes as one of "The World's Best Life Insurance Companies."