What Is a MYGA and SPIA Annuity?

MYGA and SPIA sound like alphabet soup, but they’re two of the simplest annuities there are. One is built to grow money at a locked-in rate; the other turns money into income.

MYGA: Multi-Year Guaranteed Annuity

A MYGA is a type of fixed annuity that locks in an interest rate for a set number of years, often somewhere between three and ten. You put in a lump sum, and the insurance company credits the guaranteed rate for the whole period.

People often compare a MYGA to a bank certificate of deposit. They do have things in common, but there are important differences:

	MYGA	Bank CD
Issued by	An insurance company	A bank or credit union
Backed by	The insurer’s financial strength and claims-paying ability	FDIC or NCUA insurance, within limits
Taxes on interest	Generally tax-deferred until withdrawn	Generally taxed each year
Early access	Surrender charges may apply; may have a free-withdrawal amount	Early withdrawal penalty
Age-based tax rule	Withdrawals before 59½ may face an additional 10% federal tax	No such rule

What happens at the end of a MYGA?

When the guarantee period ends, you usually get a window to choose: take the money, move it to another annuity, renew at a new rate, or turn it into income. Put the end date on your calendar. If you do nothing, the contract may renew automatically under new terms.

SPIA: Single Premium Immediate Annuity

A SPIA works almost the opposite way. Instead of growing money, it turns a lump sum into a stream of income that usually starts within a year of purchase. You can choose how long the payments last:

• Life only: Payments for as long as you live. Generally the highest payment, but payments stop at death.
• Life with period certain: Payments for life, but if you pass away early, payments continue to a beneficiary for the remainder of a set period.
• Joint and survivor: Payments continue as long as either you or your spouse is living.
• Period certain: Payments for a set number of years, no matter what.

The payment amount depends on your age, the option you choose, the amount you put in, and interest rates at the time.

The big trade-off

Once a SPIA starts paying, you generally can’t get your lump sum back. You’re trading access to the money for dependable income. So keep enough savings somewhere else for emergencies and big expenses.

Who uses each one?

MYGA may fit someone who…	SPIA may fit someone who…
Wants a known rate for a set number of years	Wants dependable income to cover basic bills
Doesn’t need the money during the guarantee period	Is worried about outliving their savings
Likes tax-deferred growth	Is comfortable giving up access to the lump sum

Some people use both: a SPIA for income now and a MYGA for money they’ll need later.

Things to keep in mind

• Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are not bank deposits and are not FDIC insured.
• MYGAs usually have surrender charges during the guarantee period
• Part of each SPIA payment from non-retirement money may be a tax-free return of your premium, and the rest is taxable. See IRS Publication 575: Pension and Annuity Income
• Inflation can reduce the buying power of fixed payments over time
• Suitability matters: the right choice depends on your age, health, income needs, and other savings

Questions to ask

• What is the guaranteed rate, and for how long? (MYGA)
• What are the surrender charges and free-withdrawal amount?
• What happens at the end of the guarantee period?
• What would my payment be under each income option? (SPIA)
• What happens to remaining money if I pass away?

A word about timing

Because MYGA rates and SPIA payments are tied to interest rates when you buy, the timing of a purchase affects what you get. Nobody can predict rates, so instead of trying to time it perfectly, some people spread purchases over time or split money between products. Talk through the pros and cons with a licensed professional before you decide.

Read the contract and disclosure

Before you buy either one, go over the contract, the disclosure, and any buyer’s guide you’re given. Confirm the guaranteed rate or payment, how long it lasts, what happens if you pass away, and the free-look period in your state. Keep asking questions until you’re comfortable. A good agent will never rush you.

If you’d like to see how a MYGA or SPIA might fit into your retirement plan, I’m glad to go over it with you in plain words.

This article is for general educational purposes only and is not legal, tax, or financial advice. Coverage, pricing, and availability vary by age, health, state, and carrier.

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