Any reason not to do a MYGA?

[Lorenzo]

The reason that they can offer better rates than CDs or Treasuries is because they profit off the spread between what they pay you and the corporate bonds and other higher yielding fixed income securities that they invest in.

I am wondering how big is this spread? Would the additional risk be worth it to just do a bond ladder using those target-date maturity ETFs? You would have the added advantage of more liquidity and control.

 

[pb4uski]

Well back in the mid 1990s my employer targeted 200bps spread but corporate spreads to the Treasury were a lot wider than they are today. I have no idea what it would be today but I'm pretty sure it is narrower, probably 1-2%.

From Gemini:
Insurers don't just look at Treasuries; they build a "yield sandwich." Their goal is to find the highest yield possible within strict regulatory risk limits.

• The Investment Yield: Insurers primarily buy A to Baa rated corporate bonds and asset-backed securities. As of early 2026, these high-grade corporates are yielding roughly 5.00% – 5.50%.
• The Credited Rate (to you): To stay competitive with CDs and Treasuries, top-tier 3-year MYGAs are currently offering between 4.75% and 5.50%.
• The Spread (The Gap): This leaves the insurer with a gross spread of roughly 1.25% to 1.75% to cover their costs.

 

[GenXguy]

MYGAs may be a promising option for some investors, depending on their goals and investing style.
For me, they’re not a fit.

MYGA worked great to me to defer all the income for some years so that I could lower my MAGI and get more subsidies for ACA while I'm still using it.

 

[marinauser]

I think that you just keep in mind that insurance companies can and do fail. I remember in the early 90s when Inland Steel had guaranteed income funds run by insurance companies in the 401k plan. Some insurance companies ran into issues and plan participants could not get access to those investments for several years and, if I remember correctly, lost the interest that was supposedly guaranteed. That is why they have to pay a higher interest than a bank covered by FDIC or money markets that have far shorter term investment holdings often spread across a wide variety of entities borrowing the money.

 

[pb4uski]

I think that you just keep in mind that insurance companies can and do fail. I remember in the early 90s when Inland Steel had guaranteed income funds run by insurance companies in the 401k plan. Some insurance companies ran into issues and plan participants could not get access to those investments for several years and, if I remember correctly, lost the interest that was supposedly guaranteed. That is why they have to pay a higher interest than a bank covered by FDIC or money markets that have far shorter term investment holdings often spread across a wide variety of entities borrowing the money.

Ancient history. And it was in the 1980s not the 1990s. The problems that you are referring to were from GICs issued by Executive Life.

From post#21 in this thread.

...After regulatory reforms enacted in the wake of the Executive Life and Mutual Benefit Life insolvencies in the late 1980s insolvencies have been rare. ...

 

[Al18]

Your states life insurance guaranty association lists all the life insurance company that have failed and the year they failed. I count 8 that failed in the last 25 years. The insurance company credit rating is a good measure to predict failure.

By comparison, there were hundreds of bank failures in the last 25 years.

 

[jazz4cash]

Your states life insurance guaranty association lists all the life insurance company that have failed and the year they failed. I count 8 that failed in the last 25 years. The insurance company credit rating is a good measure to predict failure.

By comparison, there were hundreds of bank failures in the last 25 years.

I’ve always been curious to see the ratings of the ones that fail and especially what they were 6-12 months prior to failing. I pay attention to ratings but still a bit skeptical. I think they are often downgraded when failure is imminent.

 

[Earl E Retyre]

I have never invested in an MYGA and admittedly am ignorant of how insurance companies ensure they stay in business with all the potential insurance claims that could be made which are not in their control.

At this point, I would rather get a little less ROI with a treasury (or bank CD) and feel confident I can get my money back (and in a timely manner).

Having said that, the more posts I see here with people so confident in MYGAs, the more open minded I get to dipping my toe in the water. But at this point am going to stick with treasury/CDs.

 

[Bruno]

Not sure how to look back but when i first came here from BH, me and the lady didnt get along. I WAS about run out of here (ER) when i started talking about MYGA. They just could not believe there was NO fees. Annuitys were the worst thing a person could every buy. Now some of those old Annuitys haters are talking how good MYGA are. It was so funny to me when one person finally post to another person ..YES it says NO fee's!! That made my life easier here at ER. I seldom go back to BH unless i have a insureance or annuity question and the BEST person to help is Stinky.

 

[Al18]

Hopefully Pb4uski will chime in. I think if an insurance company is having difficulty, there are remedies that allow them to fix themselves - these may take years.

 

[pb4uski]

I have never invested in an MYGA and admittedly am ignorant of how insurance companies ensure they stay in business with all the potential insurance claims that could be made which are not in their control....

Mortality and morbidity are very predictable. When I worked in finance for an insurer our mortality and morbidity variances were negligible.

Now claims for property and casualty insurance are much more volatile but P&C companies are separate from Life & Health insurance companies.

 

[pb4uski]

Hopefully Pb4uski will chime in. I think if an insurance company is having difficulty, there are remedies that allow them to fix themselves - these may take years.

There is a whole process that ideally identifies problems early and regulators intervene and companies are expected to provide remediation plans. A lot of things happen before a regulator takes the keys.

 

[Al18]

Keep in mind that a MYGA lasts from 3-10 years, not a lifetime (SPIA).

 

[jazz4cash]

Not sure how to look back but when i first came here from BH, me and the lady didnt get along. I WAS about run out of here (ER) when i started talking about MYGA. They just could not believe there was NO fees. Annuitys were the worst thing a person could every buy. Now some of those old Annuitys haters are talking how good MYGA are. It was so funny to me when one person finally post to another person ..YES it says NO fee's!! That made my life easier here at ER. I seldom go back to BH unless i have a insureance or annuity question and the BEST person to help is Stinky.

Yeah, this group has evolved ALOT on the subject of MYGAs. They used to be lumped in with all other annuity products.

 

[jazz4cash]

I have never invested in an MYGA and admittedly am ignorant of how insurance companies ensure they stay in business with all the potential insurance claims that could be made which are not in their control.

At this point, I would rather get a little less ROI with a treasury (or bank CD) and feel confident I can get my money back (and in a timely manner).

Having said that, the more posts I see here with people so confident in MYGAs, the more open minded I get to dipping my toe in the water. But at this point am going to stick with treasury/CDs.

Think of it this way. There are two major types of insurers. Property/casualty is one type. Claims are very unpredictable. Life Insurance is different because the averages for a large population are highly predictable. You can easily get a price on a 20 year life policy but home and auto insurance is priced annually or every 6 months. MYGA policies are typically issued by Life insurance companies. I know some companies issue both types. I guess health insurance could a 3rd type but it’s not really insurance, had annual premiums.

 

[MBSC]

I’ve always been curious to see the ratings of the ones that fail and especially what they were 6-12 months prior to failing. I pay attention to ratings but still a bit skeptical. I think they are often downgraded when failure is imminent.

Atlantic Coast Life in Charleston, SC may be close to failing. They were downgraded from B++ to B in January.

Atlantic Coast Life Insurance Company - Company Profile - Best's Credit Rating Center

ratings.ambest.com

 

[Lorenzo]

Yeah, this group has evolved ALOT on the subject of MYGAs. They used to be lumped in with all other annuity products.

Maybe more than just this group. If you look up information on what MYGAs are, many financial pundits and other sources describe them as simply the insurance industry’s version of a CD. Widespread descriptions like that helped form my understanding.

 

[jazz4cash]

Maybe more than just this group. If you look up information on what MYGAs are, many financial pundits and other sources describe them as simply the insurance industry’s version of a CD. Widespread descriptions like that helped form my understanding.

I agree. Sometimes it feels like the boat is getting crowded. Everybody wants to be in the MYGA market. New products from a few issuers are simple interest. They disclose it but I think many will not realize the rates are apple v oranges. They will sit at the top of any rate search and I guess they fill a certain need.

 

[ShokWaveRider]

MYGAs have been good to us over the years ....... so far. Help with year end tax estimations, defer income when needed (ACA), and have been responsive when calling with questions. I always call the insurance company direct rather than the broker. The broker just calls them then calls us back, so I cut out the middle man for withdrawals and questions like, how much interest can we use to defer a given years taxes.

 

[Luvtoride]

I have owned and search for MYGA’s regularly. I just received this attractive offering for a new one…compelling for sure and gets your attention:

Guaranteed simple interest rates as high as 6.30% A- (Excellent) AM Best rated company founded in 1957 with over $518 million in assets No fees, loads or sales charges Full account value withdrawal available after interest guarantee period Principal protection Tax-deferred growth No stock market exposure Yes, these are marketing pitches and it does state “simple interest “ but by design, these would get a lot of inquiries from investors.

 

[pb4uski]

Keep in mind that a MYGA lasts from 3-10 years, not a lifetime (SPIA).

They can last a long time if you just keep rolling them over but that creates a problem later in that a lot of the value is undistributed interest which is taxable first.

 

[pb4uski]

Think of it this way. There are two major types of insurers. Property/casualty is one type. Claims are very unpredictable. Life Insurance is different because the averages for a large population are highly predictable. You can easily get a price on a 20 year life policy but home and auto insurance is priced annually or every 6 months. MYGA policies are typically issued by Life insurance companies. I know some companies issue both types. I guess health insurance could a 3rd type but it’s not really insurance, had annual premiums.

+1 but a bit nit picking... the two types of insurers are P&C (Property & Casualty) and L&H (Life & Health). They even have different color regulatory filings... P&C is a "yellow book" and L&H is a "blue book". Only L&H companies can issue annuities... P&C companies cannot.

Where you mght get the impression that some companies issue both types is where there is a parent that has both a P&C subsiduary that issues P&C policies and a L&H subsidiary that issues L&H policies. For example, MetLife once sold both P&C and L&H through separate subsidiaries (they may still do but I have a faint recollection that they sold their P&C business to Farmers many years ago).

In my experience, generally L&H companies issue life or health and not both, but there are some exceptions and nuances... for example, disability insurance is technically a health insurance product but a lot of L&H companies used to sell both life insurance and disability insurance.

And health insurance is really insurance! (not sure where that came from) and there are many L&H companies that only issue health insurance but not life insurance.

 

[pb4uski]

Atlantic Coast Life in Charleston, SC may be close to failing. They were downgraded from B++ to B in January.

Atlantic Coast Life Insurance Company - Company Profile - Best's Credit Rating Center

ratings.ambest.com

Yeah, did a little reading and it sounds like a sh!tshow. Luckily, they are only ~$1.7b. IF the business that they issued is viable, sometimes a healthy company will "assume" a block of business and step into the shoes of the issuing company as part of a regulatory workout... but they haven't got to that stage yet.

 

[pb4uski]

I have owned and search for MYGA’s regularly. I just received this attractive offering for a new one…compelling for sure and gets your attention:

​

Guaranteed simple interest rates as high as 6.30% A- (Excellent) AM Best rated company founded in 1957 with over $518 million in assets No fees, loads or sales charges Full account value withdrawal available after interest guarantee period Principal protection Tax-deferred growth No stock market exposure Yes, these are marketing pitches and it does state “simple interest “ but by design, these would get a lot of inquiries from investors.

$518 million in assets is puny. 6.3% makes me wonder what they are investing in to offer that high a crediting rate!

 

[jazz4cash]

Atlantic Coast Life in Charleston, SC may be close to failing. They were downgraded from B++ to B in January.

Atlantic Coast Life Insurance Company - Company Profile - Best's Credit Rating Center

ratings.ambest.com

Atlantic Coast is under acquisition but it seems the process is lagging. I think the acquirer has private credit assets that are under increased scrutiny.