Many who have planned and saved for retirement are now being confronted with the harsh reality of today’s uncertain economy. According to recent studies, 42% of pre-retirees report that their retirement plans have been delayed, changed, or cancelled due to market performance in the last 5 years. Those in the middle of planning and those just starting retirement planning are all trying to create the right strategy for their long-term needs.
Although there is no universal plan for everyone, a Multi-Year Guaranteed Annuity (MYGA) can be a part of a safe retirement strategy when personalized for the individual’s situation and combined with other accounts.
This article provides useful insight, in easy to understand language, about what influences the right timeline for MYGAs. Beneficial for anyone planning for retirement, the factors outlined here are designed to help readers make the best decisions for their retirement goals and family legacy.
Why Holding Periods Matter
MYGAs are designed with fixed terms, which means they grow at a predictable rate, depending on the interest set in the contract. The term of an annuity can be set anywhere, typically from 3-10 years. During this time period, the account grows while being protected from negative market changes.
While the short and flexible timelines of MYGAs can benefit those who have a short time horizon until retirement, holding them longer can maximize tax-deferred growth. The goal is to find the right timeline for each family’s situation, rather than try to define a single timeline as “ideal” for everyone.
Factors That Influence The Right Timeline
Most individuals or couples have or will have a variety of retirement accounts in place including one or more of the following: 401(k), IRA, SEP, SIMPLE, Roth, etc. To help create the right timeline strategy, one or MYGAs can be a perfect addition to any of those accounts.
Since the MYGA maturity timeline, unlike many of the aforementioned accounts, is something that can be planned, those who want to take a hands-on approach to their accounts can more easily match the distribution timeline to their cash needs if they account for these factors:
Contract Length & Accumulation Rate
MYGAs are typically held for fixed contract lengths of 3, 5, 7, or 10 years. Longer terms may offer more growth but can limit the account holder’s access to cash funds and limit opportunity for more growth.
To create a more secure, long-term retirement strategy, many prefer to stagger multiple MYGAs to balance growth and allow access to funds. Opening multiple MYGAs with varying term lengths can open opportunity for capturing improved interest rates, reducing the difficulty of timing the market. There is a security factor of knowing that at various periods, cash will be available to use as needed, or reallocate for continued growth.
Retirement Income Needs
MYGA timelines should account for when other retirement income streams, such as Social Security, pensions, and market-dependent investments like mutual bonds, become accessible for withdrawal. This helps determine cash needs and allows the MYGA to become a bridge between multiple accounts, rather than a sole source of income.
Liquidity & Surrender Periods
Another significant concern in the MYGA withdrawal timeline is how soon account holders will need liquid funds and how much cash they will need. Taking income before the annuity matures can limit its growth or even trigger surrender charges if the withdrawal is too large (most accounts permit up to 10% withdrawal before penalties). Again, laddering multiple MYGAs with varying contract lengths can provide a buffer.
Benefits Of Holding a MYGA Before Income
Maximum growth usually means no access to liquid funds. Since MYGA terms can be as short as 3 years, families can plan the timeline during their pre-retirement years around both their predicted cash needs and market risk tolerance. Benefits include:
- Provides stability during the pre-retirement years when avoiding market risk is key
- Maximizes predictable, tax-deferred growth
- Creates flexibility to roll into another MYGA or annuity if timelines change
By holding multiple MYGAs or rolling them into other annuities, pre-retirees can remain flexible with their options while steadily and predictably growing their accounts.
Common Mistakes To Avoid
Despite these advantages, MYGAs can create risks in certain situations. By withdrawing too soon or too much, account holders can miss out on the compounding interest and high growth rates that often come with market-dependent accounts such as traditional stocks.
Those who withdraw before age 59 ½ may have to pay IRS penalties (up to 10% on the taxable portion of the withdrawal), in addition to the surrender charges.
Additionally, since MYGA terms are locked in, opening an account that doesn’t match the owner’s goals for retirement or their cash flow needs can cause issues later. Ignoring the role that a MYGA plays in a broader retirement plan and trying to make it the primary source of income is usually not a sustainable strategy for stress-free retirement.
Consulting with a provider who specializes in holistic planning can provide clear, easy to understand guidance about timing, answers to your questions, and a strategy designed around your goals.
How Matador Helps Determine The Right Holding Period
One of the greatest dangers of retirement planning is the idea that a single product or strategy can provide the best retirement account roadmap for any situation. That’s why we use the Matador Milestone Process to review the individual’s income needs in retirement, their timeline to retirement, and their cash flow requirements before recommending account and holding strategies.
Our team-based approach helps people concerned about the security and consistency of their accounts avoid the dangers of individual agent bias, which are normally associated with retirement planning services. At Matador, multiple experienced advisors consult on each account to match the owner’s income needs and legacy goals with the right timeline.
For a brief summary of how MYGA account timing could work in different scenarios, here’s a chart that includes each account term, along with potential use cases:
| MYGA Term | Key Benefit | Use Case | Considerations |
| 3-year | Short-term stability | Short retirement timeline or supplementing a transition | Quick turnover time means more immediate liquidity |
| 5-year | Balanced growth vs cash access | 5-7 years from retirement with mid-long cash access needs | Balanced time horizon with competitive accumulation |
| 7-10-year | Maximum predictability | Longer timeline with less immediate cash needs | Less flexibility with a longer commitment, more potential for growth with the right timing |
However, each MYGA term has benefits and considerations in different scenarios. Speak with local advisors to learn more about how your timeline and cash flow needs should impact your retirement plans.
Make Your Income Timing Work For You
Just as there is no ideal retirement account for every situation, there is no one-size-fits-all holding period for MYGAs. At Matador Insurance, our team works with individuals to learn how their cash flow needs, timelines, and legacy goals should influence their retirement finances moving forward. Rather than focus on selling a product, our goal is to personalize every retirement plan to meet the needs and expectations of each person as they secure their future and their legacy.
Contact our team today to learn how a MYGA can be used to your advantage when combined with other accounts to create a personalized retirement timeline that secures your future, regardless of market performance.