Fixed Annuity Rates Guide: How to Read MYGA Rates Before You Buy 2026

The bottom line: a MYGA is a CD from an insurer, but three things decide whether it’s a good one

My read is that most people shop fixed annuities backwards. They see a headline rate like 5-point-something percent, get excited, and sign. I do the opposite. Before I look at any rate, I check three things: the insurer’s credit rating, the surrender-charge schedule, and the average effective rate across the entire guarantee period. Skip those and you can end up with your principal docked when you need cash early, or a renewal rate that quietly collapses three years in.

The simplest, most transparent fixed annuity sold in the US is the MYGA, short for Multi-Year Guaranteed Annuity. An insurer promises a set rate for a fixed term of, say, three, five, or seven years. It feels almost identical to a bank CD, with two important differences. First, the interest compounds tax-deferred. Second, the guarantee comes from the insurance company itself, not the FDIC. Those two differences are exactly where the appeal and the risk live.

This guide is US-focused. It covers what really moves MYGA rates, how a MYGA differs from fixed indexed and variable annuities, how to weigh surrender charges and liquidity, how the tax deferral works, and the specific mistakes that cost real buyers real money. Because exact rates change weekly, I’ll stick to ranges and structure and point you to the carrier’s official materials for the live numbers.

What actually sets the MYGA rate?

The dominant force behind MYGA rates is the broader interest-rate environment, and Treasury yields in particular. The mechanism is plain. The insurer takes your premium and invests it mostly in investment-grade bonds: Treasuries, high-quality corporates, and mortgage paper. When those bond yields climb, the guaranteed rate the insurer can safely promise climbs with them. That is why fixed annuity rates look attractive when the 10-year Treasury is elevated.

The second variable is the insurer’s own investment approach and target margin. Under the same rate environment, two carriers will quote different numbers. A company willing to hold slightly lower-rated bonds can post a higher rate, but it is also taking on more asset risk. When one carrier’s rate stands out far above the pack, the honest question is what it is holding to fund that rate.

Third is competition and term length. When lots of insurers want fresh premium, rates get more competitive. And while longer terms usually pay more, that is not a law of nature. When the yield curve is flat or inverted, a 3-year MYGA can match or even beat a 7-year one. The instinct that “longer is always better” breaks depending on the curve.

One more thing: don’t be seduced by a “bonus rate.” Some contracts pay a high first-year rate, then drop to a low guaranteed minimum for the rest of the term. Compare the blended rate over the full period, always. A 6% first year that falls to 2% for the next four years is not a 6% product, and the illustration in the sales material rarely spells that out for you.

It also helps to know where rates sit relative to comparable safe options at the moment you shop. If a top-rated insurer’s five-year MYGA barely beats a five-year CD or a Treasury of similar maturity, the extra tax deferral and reduced liquidity may not be worth it. The gap between a MYGA and those alternatives, not the absolute rate, is what tells you whether the product is earning its constraints.

MYGA vs fixed indexed vs variable: which one fits?

These three products share a family name but carry completely different risk. Confusing them is how people end up in the wrong contract.

Feature	MYGA (fixed)	FIA (fixed indexed)	Variable (VA)
Return	Fixed at signing	Index-linked, capped	Tied to fund performance
Principal protection	Yes	Yes (0% floor)	No (can lose money)
Upside potential	Low (fixed)	Moderate	High
Main cost drag	Low (built into spread)	Caps/spreads limit gains	M&E + fund fees, high
Best for	Certainty first	Protection plus some upside	Long-horizon growth

A MYGA suits the person who wants to know the exact number today. The rate is printed in the contract, so the math is clean. An FIA protects your principal but credits interest tied to an index; because of caps and participation rates, you capture only part of a strong index year. A variable annuity actually invests in subaccounts, so it has real upside but also real downside, wrapped in the highest and most complex fee structure of the three.

There is no universally “best” choice here. But if all you want is a guaranteed rate and someone is steering you toward an FIA or a VA, that may reflect their commission more than your need. I broke down the participation-rate caps and M&E fees on the other two in Fixed Indexed Annuity vs Variable Annuity, which is worth reading before you let anyone upsell you off a plain MYGA.

Surrender charges and liquidity: where most buyers get caught

Liquidity is where beginners get burned. A MYGA pays you a higher rate in exchange for tying your money up for the term, so pulling it out early has a cost.

Contract year	Typical surrender charge	Penalty-free withdrawal (per year)
Year 1	7% to 9%	~10% of contract value
Year 3	5% to 7%	~10%
Year 5	2% to 4%	~10%
After maturity	0%	No limit

The exact schedule varies by product, so read the contract, but the shape is consistent: high early, declining yearly, zero at maturity. Many contracts add a Market Value Adjustment (MVA) on top. An MVA can increase your surrender penalty when rates have risen since you bought in. So if you surrender after rates climb, you can eat both the surrender charge and the MVA at once.

The saving grace is that most MYGAs allow a penalty-free withdrawal of around 10% of the contract value each year. If you plan to draw some income, confirm that provision and its limit. And if there’s any real chance you’ll need the whole balance before maturity, choose a shorter term to begin with. If you’re already stuck in a contract and need a lump sum, I walked through the tradeoffs of cashing out in Annuity Buyout and Lump-Sum Options.

How the tax deferral works

Tax deferral is the MYGA’s genuine edge. A bank CD taxes your interest every year whether you touch it or not. A MYGA, even in a non-qualified account, defers tax on credited interest until you withdraw. Money that would have gone to taxes stays invested and keeps compounding.

Two cautions. First, withdrawing gains before age 59½ can trigger a 10% early-withdrawal penalty. Second, when you do withdraw, the gains are taxed as ordinary income, not at capital-gains rates. That last point matters for timing: spreading withdrawals into lower-income retirement years can keep you in a lower bracket. For context on how ordinary-income and capital-gains treatment differ for a US investor, the capital gains tax guide lays out the brackets.

Inheritance changes the tax picture too. A surviving spouse can usually continue the contract and keep deferring, while a non-spouse beneficiary generally has to draw the money down and settle the tax within a set window. Ignore your beneficiary designation and your heirs can face a surprise bill. I covered the spouse vs non-spouse rules in the annuity beneficiary tax guide.

Why the insurer’s rating comes before the rate

A MYGA has no FDIC coverage. The ultimate backstop for your principal is the insurer’s ability to pay claims. That is why the credit rating deserves your attention before the rate does.

Agencies like A.M. Best, S&P, and Moody’s rate carrier financial strength. As a rough anchor, an A.M. Best rating of A- or better is generally viewed as solid, but the rating alone isn’t the point. The real question is why a given carrier can pay more than its peers. If a newer or smaller insurer is posting a rate well above market, find out whether that comes from aggressive asset risk.

Your second safety net is the state guaranty association. If an insurer fails, that body covers contracts up to a limit, commonly around $250,000 per contract, though it varies by state. So don’t pile a large sum into one carrier; split it across companies or stay within the limit. Confirm your state’s exact figure on your guaranty association’s official site.

Buying a MYGA, step by step

1. Set the goal and the term. When will you actually use this money? Don’t tie cash you need in three years into a seven-year term. Match the term to the spending date.
2. Compare rates, but on an effective basis. Line up carriers at the same term and premium. Ignore the teaser and use the blended rate over the full guarantee period.
3. Check the credit rating. Look at A.M. Best and peers, and interrogate any rate that stands out.
4. Read the surrender schedule, MVA, and free-withdrawal terms. If there’s any chance of early access, these clauses decide everything.
5. Name your beneficiary. Understand the spouse vs non-spouse rules and designate deliberately.
6. Plan for maturity. Check for an auto-renew clause and put a reminder on your calendar. At maturity you can 1035-exchange into a better product with no tax hit.

A common mistake: the auto-renewal that halved a rate

Here’s a failure I see often. A retiree bought a five-year MYGA at an attractive rate. Maturity came, they did nothing, and a buried auto-renewal clause rolled them into a fresh guarantee period. The problem: the renewal rate was well below market, and the renewal restarted a brand-new surrender-charge schedule. When they finally noticed and tried to leave, they faced surrender charges all over again.

The lesson is simple. A MYGA is not a buy-and-forget product. Set a reminder 60 to 90 days before maturity, and at that point actively decide among (1) taking the cash, (2) a 1035 exchange, or (3) renewing.

The other frequent mistake is misjudging liquidity. Someone parks their entire emergency fund in a MYGA, an unexpected expense hits, and they blow past the 10% free-withdrawal limit and pay a surrender charge. A MYGA should only ever hold money you won’t need for the term.

Where a MYGA belongs in your retirement plan

Don’t treat a MYGA as a do-everything product. It is not going to outrun inflation by a wide margin. It fills the “stable” slot: preserve principal and deliver a predictable rate for a defined period. Let equities handle growth, let dividend payers handle cash flow, and let the MYGA handle certainty. If you’re building out the dividend-income leg, the SCHD dividend ETF guide pairs naturally with a MYGA on the conservative side. And if you’re weighing an annuity against tax-advantaged retirement savings accounts, annuities vs pension savings frames that tradeoff.

The appeal of a MYGA isn’t excitement, it’s predictability. To actually enjoy that predictability you have to look past a single rate and weigh five axes together: term, charges, credit strength, taxes, and succession. The buyer who lines up all five ends up in a very different place three years later than the one who signed for the headline number.

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This article is for informational purposes only and is not a recommendation to buy or surrender any specific financial product. Annuity rates, fees, tax treatment, and guaranty limits vary by product, timing, and state of residence, and the details here reflect conditions at the time of writing. Confirm the current terms with the carrier’s official disclosure documents and a qualified tax or financial professional before acting.