What Is a MYGA?

If you’re looking for a way to save for your retirement or other long-term financial goals, you may want to consider a MYGA, or a Multi-Year Guaranteed Annuity. MYGAs are a type of annuity that offer a fixed rate of return over a specified period of time, making them a popular choice for those who want to earn a predictable, stable return on their investment.

In this article, we’ll cover the basics of MYGAs, including how they work, their benefits and drawbacks, and whether they may be a good choice for you.

What Is a MYGA?

A MYGA is a type of annuity that provides a guaranteed rate of return over a fixed period of time, typically ranging from three to ten years. Unlike other types of annuities, MYGAs offer a fixed interest rate, which means you know exactly how much your investment will grow over the specified period.

How Do MYGAs Work?

When you purchase a MYGA, you make a lump-sum payment to the insurance company offering the annuity. In return, the insurance company guarantees to pay you a fixed interest rate on your investment over the specified period of time, typically with a minimum guarantee.

At the end of the MYGA’s term, you can choose to either withdraw your money, roll it over into a new MYGA, or convert it into a different type of annuity.

Benefits of MYGAs

One of the main benefits of a MYGA is the guaranteed rate of return, which provides peace of mind for investors who want a predictable, low-risk investment option. Additionally, MYGAs can offer higher interest rates than other fixed-income investments, such as CDs or money market accounts. Furthermore, MYGAs may offer certain tax advantages, depending on how they are structured.

Drawbacks of MYGAs

While MYGAs offer a number of benefits, they also have some drawbacks. For one, they may not keep pace with inflation, which means your investment may lose purchasing power over time. Additionally, MYGAs are illiquid, meaning you may not be able to access your funds without paying significant fees or surrender charges. Finally, MYGAs typically come with higher fees than other investment options, which can eat into your returns.

Is a MYGA Right for You?

Whether or not a MYGA is a good investment option for you depends on your individual financial goals and risk tolerance. If you’re looking for a low-risk investment option with a guaranteed rate of return, and you’re willing to sacrifice liquidity and potential growth in exchange for predictability and stability, a MYGA may be a good choice. However, if you’re comfortable with taking on more risk in exchange for potentially higher returns, or if you anticipate needing to access your funds before the MYGA’s term is up, you may want to consider other investment options.

In conclusion, MYGAs can be a great option for investors looking for a low-risk, predictable investment option with a guaranteed rate of return. However, it’s important to carefully consider the drawbacks and limitations of MYGAs, and to evaluate your own financial goals and risk tolerance before making a decision. As always, it’s a good idea to consult with an advisor – like us! – before making any investment decisions.