# What is the difference between an annuity and a MYGA?

Whether it’s your first time investing or you already have many different investments, you might be looking into investing annuities or an [MYGA](https://www.annuityadvantage.com/annuity-type/multi-year-guarantee-annuities/). If you’re not sure of the differences, this guide will help explain what the differences are and what you can expect from each.


MYGA is an additional way that allows you to save for retirement and have some fixed income coming in even though you are no longer working. MYGAs are a good way to get more income besides just the social security benefits you might have coming in.

Let’s take a look at the differences in annuities and MYGAs so you can see which might be the best for you.

## What Exactly Is a MYGA?

MYGA stands for multi year guaranteed annuity. This is a type of fixed annuity and it offers a fixed interest rate. However, there is one main difference between regular fixed annuities and MYGAs and that is the length of time that you are guaranteed the fixed rate.

When you get regular fixed annuities, the interest rate is usually only guaranteed during a certain part of the contract. For example, you might get a 20 year term contract but the fixed interest rate is only guaranteed for the first 10 years.

When you get a MYGA though, the rate is guaranteed for the entire length of the contract.

Of course, fixed interest rate annuities including MYGAs are much different than variable annuities. Variable annuities are riskier and you have to ensure that you are comfortable getting a lower return as you cannot be for sure what kind of return you will get.

This is one of the reasons people choose to get MYGAs compared to variable annuities especially if they are getting older and they don’t want to make risky investments as they get closer to retirement.

If you are looking to get annuities for retirement and it’s going to be one of your main sources of income, you need to ensure you are getting something that is guaranteed as you always want to make sure you have enough money coming in to cover your bills.

## Benefits of MYGAs

Since MYGAs are very similar to fixed annuities, you might be wondering what makes them better than other annuities. Each type of annuity has its own pros and cons which is why it’s important to know the differences and then choose accordingly.

Since an MYGA offers a fixed interest rate for the entire time you have the contract, many people consider it to be less risky compared to even regular fixed annuities because you know that you are receiving the same payments for the entire time you have the contract.

MYGAs are not tied to the stock market in any way so they are not considered a risky investment which is good if you are nearing retirement and need a fixed income.

All the interest earned on MYGAs is also tax deferred. Taking money from MYGAs is often cheaper than having to withdraw money early from your IRA or 401k which means if you need a large sum of money for an unexpected expense, you can withdraw it from your MYGA without facing huge penalties.

## Do MYGAs Have Fees?

Like all investments and annuities, MYGAs have fees that you need to consider. They are often less than other types of annuities but you still need to know and understand the fees before purchasing.

You always want to ensure you are getting an MYGA with low fees. If you ever need help understanding the fees or the fine print of the annuity, it’s worth consulting with your financial advisor to see if they can offer any specific advice.

## What About CDs?

Many people think that MYGAs are the same as CDs but they are different. You might hear your advisor or an investor mention CDs and MYGAs at the same time since they have many similarities, but they are different.

For example, when you have a CD you are required to put your money away for a certain period of time or until it reaches its maturity date. Once the date has been reached, you can either withdraw the CD or you can renew it. When you renew it though, it will have a different interest rate.

For MYGAs, you can also renew them at the end of your contract. You will be offered the current rate which can be lower or higher than the current one you have. If you do not want to renew your MYGA, you can withdraw the interest and the principal amount.

With an MYGA though, you can also withdraw it early often with little to no fees. You can also transfer it to another account with higher interest.

As you can see there are many differences between MYGAs and CDs. Here are other differences:

- Like with annuities, an MYGA is a contract with an insurance company while a CD is with a bank.
- MYGAs are not FDIC insured but CDs are.
- Oftentimes, MYGAs can be partially withdrawn every year without any penalties.
- MYGAs usually have better interest rates compared to CDs.
- MYGAs have more fees and the interest is tax deferred.

## Final Thoughts

[MYGAs are a great investment](https://www.annuity.org/annuities/types/fixed/myga/) for those looking for an investment as they get closer to retirement. They often offer better returns compared to your regular 401k or IRA.

However, MYGAs are a very conservative type of investment which is why they are better for those just wanting a type of fixed income. Younger people might benefit from riskier investments as they have time to make up for losses and bad returns if needed.

MYGAs are similar to annuities in many different ways but they offer a fixed interest rate for the entire length of your contract rather than only a portion of the contract.

This means you know for sure the interest rate you are receiving and for how long. This is great for investors in retirement.