Our industry loves acronyms, this can be pretty confusing if you aren’t used to it. Annuities are not immune from this. A MYGA or Multi-year guaranteed annuity, is an annuity that offers a guaranteed, a term we normally can’t use, fixed interest over a set number of years. The main use case is for investors nearing or in retirement due to its safety. A MYGA acts similar to a CD or bond, however the taxes are deferred. There are more restrictions on the length of the annuity compared to a bond or CD, most contracts fall between three and ten years. Because of this, it is important to make sure the money you do put into MYGAs and most annuities won’t need to be withdrawn before it matures. However, if you would need to access the funds inside the annuity many plans allow you to withdraw a certain amount each year. You will still have to pay taxes on it but there won’t be extra fees associated. As you can see there are benefits and draw backs with MYGA accounts that should be factored for. If you would like help figuring out what is best for you, feel free to contact us below.
If you have an old MYGA and would like to keep deferring the tax on your gains, ask us about a 1035 exchange.