MYGA’s vs. Fixed Annuities: What Sets Them Apart?
April 24, 2024 | Kari Mellone
Annuities can provide individuals with significant value in retirement planning, such as increasing savings, managing tax exposure, or providing guaranteed income. Understanding the different types of annuities and assessing their suitability for one’s financial goals is crucial in determining whether they are the right option for an individual’s retirement strategy.
In this blog, we’ll highlight the key similarities and distinctions between MYGAs (Multi-Year Guaranteed Annuities) and other fixed annuities to help you decide which option best aligns with your financial objectives.
What is a Fixed Annuity?
An annuity is a contract between an individual and an insurance company where the individual invests money as a one time payment or several, and can come out as one payment or several.
With a fixed annuity, you pay a premium that is invested at a fixed interest rate, ensuring predictable growth for your investment. Unlike other investment options, the returns are guaranteed, which offers greater stability when it comes to market volatility. With minimal risk, no fees, and reliable growth, fixed annuities provide a secure way to build your wealth.
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What is a Multi-Year Guaranteed Annuity?
A Multi-Year Guaranteed Annuity, or MYGA, is a type of fixed annuity. A MYGA offers competitive rates that often surpass those of local CD rates. With interest compounded daily, these annuities provide a tax-deferred growth advantage, meaning taxes on gains are deferred until the annuity is liquidated. Interest rates are typically quoted as annual effective yields, making MYGAs an attractive option for those seeking steady and tax-efficient investment growth.
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How is a MYGA different from a Traditional Fixed Annuity?
Not all fixed annuities are the same. MYGA’s are unique in the characteristics and benefits they provide over other fixed annuities.
What sets MYGAs apart from traditional fixed annuities is their shorter commitment periods, a feature that makes them particularly suitable for retirees or those nearing retirement. Traditional fixed annuities offer a fixed interest rate for a specified period, while Multi-Year Guarantee Annuities guarantee a minimum interest rate for a set number of years, providing more stability. Additionally, MYGAs offer the distinct advantage of tax-deferred income stability, a key factor that makes them a top choice for individuals seeking financial security in retirement.
Working with an experienced licensed agent, such as the team at Twin City Underwriters, can make all the difference in your retirement planning. We can guide you through the complexities of annuities, help you determine what the right option for you is and which plan is most suitable for your individual needs, and provide you with the support you need for a secure retirement.
At Twin City Underwriters, we know that individualized attention to a client’s personal situation and needs are especially important, which is why we take the time to understand you and your financial goals. Contact us to schedule an appointment with one of our experienced insurance agents.
Are you ready to have a meaningful discussion about your financial needs? Call or email TCU today to set up a free, no-obligation appointment with one of our dedicated agents.
Call Twin City Underwriters to learn more: 651-488-0172 or 800-507-6778.
