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What is a MYGA (Multi-Year Guaranteed Annuity)?
A MYGA is a type of fixed annuity that offers a guaranteed interest rate for a specific number of years, typically between 3 and 10 years.
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How does a MYGA work?
When you purchase a MYGA, you deposit a lump sum with an insurance company. In return, the insurer guarantees a fixed interest rate for the chosen term. Your money grows tax-deferred until withdrawal.
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Who should consider a MYGA?
MYGAs are ideal for conservative investors seeking predictable growth, tax-deferred earnings, and principal protection without stock market exposure.
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How are MYGA interest rates determined?
Interest rates are set by the issuing insurance company based on market conditions and the length of the contract.
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Are MYGA rates better than CDs?
MYGAs often offer higher interest rates than bank CDs and benefit from tax-deferred growth, whereas CD interest is taxed annually.
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Can the interest rate change during the contract term?
No, MYGAs lock in a fixed interest rate for the entire contract term, providing stability and predictability.
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Can I withdrawal money from my MYGA early?
Most MYGAs allow penalty-free withdrawals of up to 10% of the account value annually. Withdrawals beyond that may incur surrender charges.
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What happens at the end of the MYGA term?
You typically have several options: withdraw your funds, roll them into a new MYGA, or convert them into an income stream.
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Are there surrender charges if I take money out early?
Yes, surrender charges apply if you withdraw more than the penalty-free amount before the term ends. These charges decrease over time.
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Is my MTGA interest taxed?
MYGA earnings grow tax-deferred. You only pay taxes when you withdraw funds, at which point earnings are taxed as ordinary income.
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Are there hidden fees with MYGAs?
MYGAs typically have no annual fees, but early withdrawals beyond the allowed amount may result in surrender charges and tax penalties.
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How does a MYGA compare to an indexed annuity?
A MYGA provides a fixed, guaranteed rate, whereas an indexed annuity offers returns linked to a market index with potential for higher gains but no guaranteed rate.
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Are MYGAs safe?
Yes, MYGAs are backed by the financial strength of the issuing insurance company and are further protected by state guaranty associations up to certain limits.
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What happens if the insurance company fails?
State guaranty associations provide limited protection, typically up to $250,000 per policyholder, depending on state regulations.
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