Annuity Basics: FIA and MYGA

An annuity is a contract with an insurance carrier: you pay a premium, and the carrier commits to interest crediting and, if elected, a stream of income. The two types we work with most are fixed indexed annuities (FIA) and multi-year guaranteed annuities (MYGA).

Fixed indexed annuities (FIA)

• Index-linked crediting within limits. Interest is credited based on the movement of a market index, subject to caps, participation rates, and spreads set by the carrier — you are not directly invested in the market.
• A floor against index losses. In a down index year, index-linked crediting can be zero, but the contract value does not decline from index performance alone. Rider fees and withdrawals still reduce value.
• Optional income riders. Some contracts add lifetime-income riders for an ongoing fee — the rider's guarantees and its cost both deserve a careful read.

Multi-year guaranteed annuities (MYGA)

• A fixed rate for a fixed term. A MYGA credits a declared interest rate for a set period, typically three to ten years — closer in feel to a certificate of deposit, though it is an insurance contract, not a bank deposit, and is not FDIC insured.
• Tax-deferred growth. Interest compounds tax-deferred until withdrawn; withdrawals before age 59½ may face a tax penalty.

What to read before you commit

• The surrender schedule. Most annuities charge for early withdrawals during the surrender period, which can run many years. Know the schedule and the free-withdrawal allowance before signing.
• The renewal terms. FIA caps and participation rates can change at renewal; ask how the carrier has treated existing contract holders.
• The carrier's strength. Any guarantees are subject to the claims-paying ability of the issuing carrier — its financial ratings matter.

Ready to talk it through? Find an agent or get in touch — the conversation starts with education, not an application.