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Fixed AnnuityMYGADeclared RateTax-DeferredA fixed rate, locked for the term.
A fixed annuity earns an interest rate declared by the insurance company. A multi-year guaranteed annuity, or MYGA, locks that rate for the whole term. Here is how they work, how they differ from a CD, and what to read in the contract before you sign.
What is a fixed annuity?
A fixed annuity is a deferred annuity that credits interest at a rate the insurer declares. Your premium and the interest already credited do not go down when markets fall. Interest compounds tax-deferred: you pay no tax on it until you take it out.
They come in two flavors, and the difference matters:
MYGA (multi-year guaranteed annuity). One rate, guaranteed for the entire term, commonly 2 to 10 years. When people compare annuities with CDs, this is the one they mean.
Traditional fixed annuity. A rate guaranteed for the first year or first few years, then a renewal rate the insurer sets each year, never below a minimum guaranteed rate written into the contract. Read the minimum, not just the opening rate.
Rate locked
A MYGA keeps the same rate for every year of the term.
Principal protected
Market drops do not reduce your premium or credited interest.
Tax-deferred
No 1099 for interest each year while it stays in the contract.
Income option
At the end, the value can be turned into lifetime income.
How a MYGA works, start to finish.
The mechanics are simple, which is most of the appeal. The decisions are at the start and at the end.
Usually 2 to 10 years.
Longer terms tend to pay more, and they come with a longer surrender period. Match the term to when you will actually need the money.
A single lump-sum premium.
From savings, a maturing CD, or an IRA rollover. Some carriers pay a higher rate on larger premiums.
The rate does not change.
Interest builds tax-deferred. Many contracts let you take a portion each year without a surrender charge, often the interest or a percentage of the value. Your contract states the exact amount.
Renew, move, take income, or cash out.
At the end of the term there is a window, often around 30 days, to choose. Miss it and many contracts renew automatically for a new term. Put the date in your calendar the day you sign.
MYGA vs CD: what is actually different.
They look alike on a rate sheet. They are different products with different protections, taxes and exit rules, and you should compare on all of them, not just the rate.
| MYGA (fixed annuity) | Bank CD | |
|---|---|---|
| Issued by | An insurance company | A bank or credit union |
| What backs it | The claims-paying ability of the issuing insurer. Not FDIC insured. | FDIC (or NCUA) insurance up to $250,000 per depositor, per institution, per ownership category |
| Tax on interest | Deferred until you withdraw it | Taxed each year as it is earned, even if you leave it in |
| Getting money out early | Surrender charge above the free-withdrawal amount, sometimes a market value adjustment, plus a 10% IRS additional tax on earnings before 59½ | Early-withdrawal penalty set by the bank, usually a few months of interest |
| Typical terms | Commonly 2 to 10 years | From a few months to several years |
| Lifetime income | Can be converted into guaranteed income for life | No |
| At death | Passes to a named beneficiary, usually outside probate | Payable-on-death designation available |
Short version: a MYGA trades bank-style liquidity for tax deferral and an income option.
What sets a fixed annuity rate.
We do not post rates on this page. They change often, sometimes weekly, and a stale rate is worse than none. When you ask, we pull current rates from the carriers we work with. These are the levers behind every number you will see.
The interest rate environment when you buy
Term length and surrender period
The insurer's pricing and financial strength
Premium size: some carriers pay more on larger deposits
Features such as a market value adjustment or extra free withdrawals
Read these five things before you sign.
1. The surrender schedule. How many years, and what percentage in each. Charges usually step down each year to zero. Know the year your money is fully free.
2. The free-withdrawal provision. How much you can take each year without a charge, and whether it starts in year one.
3. Any market value adjustment (MVA). If interest rates have risen since you bought, an MVA can reduce what you get when you surrender early. If rates have fallen, it can increase it. Ask whether the contract has one.
4. The insurer's financial strength rating. The guarantee is only as good as the company. Ratings from agencies such as AM Best are public, and we show them alongside every rate.
5. Waivers and the end-of-term rules. Many contracts waive surrender charges for nursing home confinement or terminal illness. Check that, and check exactly what happens when the term ends.
Every state also gives you a free-look period after the contract is delivered, commonly 10 to 30 days depending on the state and your age, to cancel for a refund. Use it to read the contract, not just the brochure.
Quick answers.
What is a fixed annuity?
A fixed annuity is a contract with an insurance company that credits interest at a rate the insurer declares. Your premium and credited interest do not go down when markets fall, and the interest grows tax-deferred until you withdraw it. Guarantees are backed by the claims-paying ability of the issuing insurer.
What is a MYGA?
A MYGA, or multi-year guaranteed annuity, is a fixed annuity that guarantees one interest rate for the entire term, commonly 2 to 10 years. At the end of the term you can renew, move the money to another annuity, turn it into income, or take it out.
Are fixed annuity rates guaranteed?
For a MYGA, yes, for the whole term. For a traditional fixed annuity, the opening rate is guaranteed for a set period, usually the first year or first few years, and after that the insurer sets a renewal rate each year that cannot fall below the minimum guaranteed rate in the contract.
What is the difference between a fixed annuity and a CD?
A CD is a bank deposit insured by the FDIC up to its limits, and its interest is taxed every year. A fixed annuity is an insurance contract backed by the insurer, not the FDIC, and its interest is tax-deferred until withdrawn. Early access works differently too: CDs charge an early-withdrawal penalty, while annuities charge surrender charges above the free amount and the IRS may add a 10% additional tax on earnings taken before age 59½.
Can you lose money in a fixed annuity?
Not because of the market. You can lose money by surrendering more than the free amount during the surrender period, through a market value adjustment on some contracts, or if the issuing insurer fails. That is why the surrender schedule and the insurer's financial strength matter as much as the rate.
What happens when a MYGA term ends?
You get a window, often about 30 days, to renew for a new term at the current rate, move the money to another annuity through a 1035 exchange, turn it into income, or withdraw it. If you do nothing, many contracts renew automatically, sometimes into a new surrender period, so mark the date.
How are fixed annuities taxed?
Interest is tax-deferred while it stays in the contract. When you withdraw from a non-qualified annuity, earnings come out first and are taxed as ordinary income. If the annuity sits inside an IRA, withdrawals are generally taxable in full. See our guide to how annuities are taxed for the details.
Is a deferred annuity the same as a fixed annuity?
Not quite. Deferred describes timing: the money grows now and pays out later. Fixed describes how it grows. A fixed annuity is one kind of deferred annuity; a fixed indexed annuity is another. An immediate annuity is the opposite of deferred, because payments start right away.
See today's fixed annuity rates side by side.
Tell us how much, for how long, and when you might need it. We will line up current MYGA and fixed annuity rates with each insurer's rating and surrender schedule, so you compare the whole contract, not just the headline number.
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Important: Annuities are insurance contracts, not bank deposits. They are not FDIC insured and are not guaranteed by any bank or government agency. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Withdrawals above a contract's free amount during the surrender period may be subject to surrender charges and, on some contracts, a market value adjustment. Taxable amounts withdrawn before age 59½ may also be subject to a 10% IRS additional tax. Fixed indexed annuities are not a direct investment in the stock market or in any index. Products, features and availability vary by carrier and by state. iCoach Solutions offers fixed, fixed indexed and income annuities. We do not offer securities, including variable annuities, and we do not give investment, tax or legal advice: talk with a qualified tax professional about your own situation. This page is general education, not a recommendation.