It’s understandable that not everyone wants all their money riding the ups and downs of the market. That’s why many people keep a portion of their savings in Certificates of Deposit (CDs)—safe, predictable, and backed by the bank’s guarantees. If that sounds like you, there’s another option worth considering: the Multi-Year Guaranteed Annuity, or MYGA.
What’s a MYGA?
A MYGA is a type of fixed annuity offered by insurance companies. Like a CD, it pays a guaranteed interest rate for a set period, typically 3, 5, or even 7 years. You know exactly what you’ll earn, and your principal is protected.
How is it similar to a CD?
- Fixed interest rate for a specific term
- Safe from market volatility
- Ideal for people who value security and predictability
How is it different?
- Higher yields: MYGAs often offer better interest rates than comparable CDs.
- Issued by insurance companies: Instead of FDIC insurance, MYGAs are backed by the claims-paying ability of the insurer (with additional protection from state guaranty associations, subject to limits).
- Tax deferral: Unlike CD interest, which is taxed annually, MYGA earnings grow tax-deferred until you withdraw them, potentially boosting your effective yield.
- Liquidity trade-offs: Like a CD, your money is committed for the term, and early withdrawals may face penalties.
Why consider one?
If you’re holding “safe money” in CDs, Treasuries, or other fixed-income investments, a MYGA can offer a higher guaranteed return without taking on market risk. For many, it’s a way to make that conservative portion of their portfolio work harder.
The bottom line
It’s not about replacing your entire investment strategy, but rather making the most of the money you’ve already decided to keep out of the market. If safety is your priority, but you’d like to see more growth than a bank CD offers, a MYGA could be worth a look.
Want to learn more? Let’s talk about how to fit a MYGA into your overall plan so your “safe” money can be both protected and productive.