MYGA Pros and Cons: An Honest Breakdown

The pros of a MYGA are a fixed rate locked for the full term, no market risk to principal, tax-deferred growth on non-qualified money, and rates that have recently run above bank CDs. The cons are a surrender charge for early access, no FDIC insurance, a rate that cannot rise mid-term, and inflation risk on longer terms.

A multi-year guaranteed annuity is the closest thing in the annuity world to a signed lease. You hand an insurance company a sum of money for a set number of years. The company tells you, in writing and up front, exactly what it will pay you for the use of that money. Both sides know the number and both sides know the end date. Break the lease early and there is a penalty, spelled out in the contract before you sign.

That is the whole product. There is no index to track, no cap rate to decode, no subaccount to pick. It is one of the few financial products where you can know your ending balance on the day you start, assuming you hold it to term and the company behind it stays healthy.

What follows is the honest version of the list, including the parts a rate table will never show you. Read the cons as carefully as the pros. If the lease term does not fit your life, the rate on the front of the brochure does not matter.

Those first two figures come from our own rate feed pulled September 2, 2026, and they move. The live board lives on the MYGA rates page, which refreshes as carriers file changes. The bank figure is the FDIC national deposit rate for a 60-month CD published August 17, 2026 at fdic.gov. Treat all three as a snapshot, not a quote.

What is a MYGA, exactly?

A MYGA is a deferred fixed annuity that credits one guaranteed interest rate for a stated number of years, usually two to ten. It has four moving parts, and every pro and con below comes out of one of them.

If you want the ground-floor version first, start with what a MYGA is and then come back here for the trade-offs.

What are the pros of a MYGA?

The pros of a MYGA come down to knowing the answer in advance. That is rarer than it sounds.

• The rate is locked for the whole term. Not a teaser that resets after year one, and not a rate the carrier can lower because conditions changed. A five-year MYGA credits its stated rate for five years. Read the contract to confirm the rate applies to the full term and not just the first year, because a few products are structured with a first-year bonus and a lower base rate afterward.
• No market risk to your principal. Your balance does not fall because the market fell. There is no index, no subaccount, and no participation formula. A losing year for stocks is simply a normal year for your MYGA.
• Tax-deferred growth on non-qualified money. Interest inside a non-qualified annuity is not taxed each year the way bank interest is. It compounds on the full balance until you withdraw. This is general education and not tax advice. See how annuity taxes work and our deeper piece on how a MYGA is taxed.
• Almost no explicit fees. A plain MYGA typically has no annual contract charge, no administrative fee, and no fund expense. The carrier’s cost is built into the rate it offers you, which is why comparing posted rates is more useful than hunting for a fee line.
• Simple enough to actually understand. Rate, term, minimum, surrender schedule, carrier rating. Five things. Complexity is where bad deals hide, and there is very little room for complexity here.
• Rates have recently run above bank CDs. As of September 2, 2026, the top posted five-year MYGA in our feed was 6.25 percent, against an FDIC national average of 1.36 percent for a 60-month CD in August 2026. That gap is not permanent and the two products are not backed the same way, which is exactly the trade covered below.

What are the cons of a MYGA?

The cons of a MYGA are all versions of the same thing: you gave up control of the money for the length of the term, and you cannot change your mind for free.

• Your money is committed for the term. Most MYGAs allow a free withdrawal each year, commonly around 10 percent of the value, and sometimes only the interest earned. Above that, a surrender charge applies. If there is a realistic chance you need this cash next year, this is the wrong product and no rate fixes that.
• It is not FDIC insured. A MYGA is backed by the claims-paying ability of the issuing insurance company, not by the federal government and not by a bank. That is a different kind of backing than a bank deposit. Check the carrier’s AM Best rating before you compare rates, not after.
• A market value adjustment can move the number. Many MYGAs apply a market value adjustment to early withdrawals, which can raise or lower your proceeds depending on how rates moved since you bought. It stacks on top of the surrender charge rather than replacing it.
• The rate cannot rise mid-term. Lock in five years and rates climb a point next year, you are still earning your rate. That is the same coin as the guarantee, just the other side of it.
• Inflation risk grows with the term. A fixed rate says nothing about what a dollar will buy in year ten. The longer the lease, the more that matters.
• Early withdrawals before age 59 and a half may add a 10 percent IRS penalty. That is on top of any surrender charge, and it applies to the taxable portion. Treat MYGA money as retirement money from day one.
• Rate shopping has a floor of homework. The highest number on a board is sometimes attached to a lower-rated carrier, a large minimum deposit, or a state you do not live in. The top rate and the right rate are frequently not the same product.

Is a MYGA better than a CD after tax?

Neither product is universally better, and the honest comparison has three axes, not one: the rate, the backing, and the tax treatment. Here is the side by side.

The tax line is the one people miss. In a taxable account, a CD sends you a 1099 every year and you pay tax on interest you may never have touched. A non-qualified MYGA defers that until withdrawal, so the full balance keeps compounding in the meantime. For a saver in a meaningful tax bracket, deferral can matter more than a few tenths of a percent on the headline rate. It also means the eventual withdrawal is taxed as ordinary income rather than at capital gains rates. None of this is tax advice, and your bracket at withdrawal is the variable that decides whether deferral helped.

Run your own numbers with the MYGA versus CD calculator, and read the full MYGA versus CD comparison for the cases where the CD is genuinely the better answer.

What does the surrender trade-off actually cost?

The surrender trade-off costs you access, and the price is written into the contract as a declining percentage. Here is what it looks like in dollars.

That example is the whole argument for matching the term to the money. Three years of commitment you can genuinely keep beats five years you cannot. If your timeline is uncertain, a laddering strategy that staggers maturities across terms is usually a better fit than one long contract. Our guide to annuity surrender charges walks the schedules in more detail.

What happens when the term ends?

At the end of the term you get a window, usually 30 days, to decide what happens next, and doing nothing is a real decision with real consequences. Most contracts renew automatically if you do not act, often at a renewal rate well below what a new contract would pay.

The full decision tree lives in MYGA maturity options. The one thing not to do is let the window pass without looking, since automatic renewal is the option the carrier picks for you.

Who is a MYGA actually right for?

A MYGA fits the person who has a specific pile of money with a specific date attached and no appetite for watching it move. Check yourself against this list honestly.

• A defined timeline. I know I will not need this specific money for at least the length of the term.
• A cushion elsewhere. I already have an emergency fund and liquid savings outside this money.
• A preservation job, not a growth job. I want this money to hold and compound quietly, not to chase returns.
• Clear on the backing. I understand this is backed by an insurer’s claims-paying ability, not FDIC insurance.
• Carrier checked. I have looked at the AM Best rating of the company issuing the contract, not just the rate.
• Read the schedule. I have seen the surrender schedule, the free withdrawal amount, and whether an MVA applies.

If you stalled on the timeline or the cushion, that hesitation is the answer. A shorter term, or no annuity at all, is the better outcome compared with a surrender charge two years from now.

Where does that leave you?

It leaves you back at the lease. A MYGA is a fixed term at a known number, with a penalty for leaving early, backed by a company you should check before you sign. When the term fits your life, that structure is a feature. When it does not, everything on the pro list turns into a con.

The next move is not to decide from a table. It is to look at the current board, note which carriers are behind the top numbers, and then pit that against your own timeline.

Frequently asked questions