Why 5-Year MYGAs Are the Sweet Spot for Most Buyers
Written & reviewed by Hans Goldstein, Independent Licensed Insurance Producer · NPN 20602398Independently reviewed & last updated 2026-06-09
Quick take: A 5-year MYGA hits the perfect middle ground — high enough yield to beat CDs by 150-200 bps, short enough lockup that you're not committed past 70 if you start at 65, and renewal optionality at maturity. Below: the math, the renewal-integrity question, and why "5-year" wins for most buyers.
The peace-of-mind framework
Buyers want three things in safe money:
1. Yield that beats inflation + taxes
2. Lockup tolerance they can live with
3. Predictability — knowing exactly what they get
A 5-year MYGA delivers all three. Here's why.
Yield: 5-year is at the rate-curve sweet spot
As of June 2026:
| Term | Top Rate | Carrier |
|---|---|---|
| 2-year | 5.15% | CL Sundance (B++) |
| 3-year | 5.85% | Wichita Security (B+) |
| 5-year | 6.25% | Wichita Security (B+) |
| 5-year (A-rated) | 5.85% | Aspida WealthLock (A-) |
| 7-year | 6.10% | Wichita Security (B+) |
| 10-year | 6.05% | Farmers/Wichita |
The 5-year rate is actually HIGHER than 7-year and 10-year. The yield curve has been inverted at this term for most of 2026 — carriers are pricing 5-year aggressively to capture buyer flow.
Hans's note: This is unusual. Typically longer = more yield. The 5-year premium right now is a market opportunity.
Lockup: 5 years is short enough to plan around
For a 65-year-old buying a 5-year MYGA:
- Exit at 70 — still healthy, still flexible
- Money is back BEFORE Social Security max claim age (70)
- Money is back BEFORE Medicare gap-year decisions get complex
- Money is back BEFORE RMDs trigger at 73
For a 60-year-old:
- Exit at 65 — Medicare onset, retirement transition
- Money available for first "active retirement" years
- Plenty of time to roll into another MYGA or SPIA
For a 70-year-old:
- Exit at 75 — still within typical life expectancy
- Avoids the 10-year-FIA "exit age 80+" problem
5-year is the maximum term most retirees should consider unless they have very specific long-hold reasons.
The renewal-integrity question
Here's the unsexy truth about MYGAs:
When your 5-year MYGA matures, the carrier offers a renewal rate. The renewal rate is almost always LOWER than the new-money rate.
How carriers handle renewals
Carriers segment buyers into two pools:
- New money pool — gets the headline rate to attract you (6.25% today)
- Renewal pool — gets a lower rate because they assume you won't shop around
The difference is typically 50-150 basis points. So your 6.25% MYGA at maturity may renew at 4.75-5.75% — even though new buyers get 6.25%.
How to defeat this
Two options at maturity:
1. §1035 exchange to a different carrier's NEW MYGA at current market rate
2. Surrender within the 30-day window and reinvest
Both options take you out of the "renewal pool" and into the "new money pool" elsewhere. This is the entire point of a 5-year strategy — you have a built-in decision point every 5 years to optimize.
Renewal Integrity grades
Some carriers have BETTER renewal histories than others:
| Carrier | Renewal Integrity Tier | Notes |
|---|---|---|
| Wichita National | A (transparent, predictable) | Publishes renewal rates publicly |
| Aspida | A- (Apollo-backed, fairly competitive) | Generally close to new-money |
| Delaware Life | B (Group 1001 — variable history) | Worth shopping at maturity |
| Athene | B+ (volume-driven, can drop) | Almost always worth 1035 |
| EquiTrust | C (renewal can drop sharply) | Strongly recommend 1035 at maturity |
See Renewal Rate Integrity guide for the full breakdown.
Predictability: 5-year vs FIA
A 5-year MYGA pays 5.85-6.25% GUARANTEED for the full term.
A 5-year FIA pays 0-7% credited annually, dependent on market performance.
| Year | 5-yr MYGA (5.85%) | 5-yr FIA (7% cap, S&P historical) |
|---|---|---|
| Y1 | 5.85% | 7% (cap hit) |
| Y2 | 5.85% | 0% (down year) |
| Y3 | 5.85% | 7% (cap hit) |
| Y4 | 5.85% | 4% (mid year) |
| Y5 | 5.85% | 6% (mid year) |
| Average | 5.85% | ~4.8% |
In MOST 5-year windows, MYGA beats FIA. The exception: 5-year periods with extreme bull markets (rare). For predictability + peace of mind, MYGA wins.
The 5-year laddering strategy
For larger amounts ($300K+), ladder across 3 different 5-year MYGAs at different carriers:
| Allocation | Year purchased | Carrier | Term ends |
|---|---|---|---|
| $100K | 2026 | Aspida WealthLock 5 (A-) | 2031 |
| $100K | 2026 | Delaware Pinnacle 5 (A-) | 2031 |
| $100K | 2026 | Oxford Multi-Select 5 (A) | 2031 |
In 2031, all three mature. Decision point:
- Roll each individually into new 5-year MYGAs (if rates still attractive)
- Pull cash from one or more (if needed)
- §1035 to a different product type (SPIA, FIA, MYGA)
This is the lowest-stress retirement income foundation strategy.
When 5-year MYGA is wrong
❌ You need income IMMEDIATELY (look at SPIA)
❌ You want index upside potential (look at FIA)
❌ You have 10-15 year horizon and want max yield (10-year MYGA)
❌ You're under 59½ (early withdrawal penalty risk)
❌ You don't have enough other liquidity (don't lock up emergency fund)
5-year MYGA recommendations by buyer profile
Conservative buyer (rating-focused)
- Oxford Multi-Select 5 — A rating, 5.55%
- MassMutual Stable Voyage 5 — A+ rating, 5.55%
Yield-focused (B++ tolerable)
- Aspida WealthLock 5 — A-, 5.85%
- GBU Compass 5 — B++, 5.95%
Maximum yield (B+ tolerable, small dollars)
- Wichita Security 5 — B+, 6.25%
What to do
📞 213-414-2808 for a 5-year MYGA ladder analysis. Hans pulls quotes from 4-5 different A/A- carriers for your specific dollar amount and shows the blended yield + carrier diversification picture. No charge.
🧮 Goldstein Complexity Index
A core part of every Goldstein review. The more complex an annuity, the worse the rating in this dimension — because complexity is where buyers get burned (confusing riders, fee structures hidden in plain sight, surrender penalties that surprise people, separate "benefit bases" they thought were cash). Simple products (SPIAs, MYGAs) score low; products with stacked bonuses + income riders + MVA + multiple crediting strategies score high.
This product's score: 8/100 — Grade A+ (Transparent)
Easy to understand. Few moving parts. The buyer can fully explain the product to a friend after one read of the contract.
Score breakdown
| Dimension | Score (1–10) | What this measures |
|---|---|---|
| Riders | 1/10 | Number of optional/required riders (income, death benefit, LTC, etc.). More riders = more fees + more confusion. |
| Crediting strategies | 1/10 | Number of index-linked strategies (cap, spread, participation rate, step rate, volatility-controlled indices). More options = harder to understand. |
| Surrender complexity | 1/10 | Length of surrender period + MVA + bonus recapture interaction. Longer + MVA + recapture = more confusion. |
| Benefit-base separation | 1/10 | If the product has a separate "PIV" or income-base that is NOT cash but feels like cash. This is the single biggest source of buyer confusion in the industry. |
| Bonus structure | 1/10 | Premium bonus with recapture schedule. The bonus is real, but the recapture is complex. |
How to read this
- A+/A (0–40): You can understand what you bought. Pure accumulation FIA, MYGA, or SPIA. Low risk of mis-selling.
- B (41–60): You need to read the contract carefully and have a second-opinion review before signing. Income riders add the most confusion.
- C (61–80): Many buyers don't fully understand what they own. Common mis-selling: "bonus" sold as cash, "benefit base" sold as account value, surrender charges undisclosed.
- D (81–100): Demands an independent producer second opinion before signing. The product may still be right for you — but the chance you'll later say "I didn't know it worked that way" is very high.
Why complexity matters more than people think: Carriers don't get sued for complexity. Agents don't get sued for it either (in most states). But buyers regret it constantly. The annuity that wins your money in year one and confuses you for the next 14 is worse than a simpler product that you understood perfectly. Simple ≠ inferior. Simple = audit-able.
⏳ Renewal rate risk — why FIA caps work like HYSA rates (NOT mortgage rates)
This is the #1 thing buyers misunderstand about fixed indexed annuities, and the single biggest source of "I didn't know it worked that way" regret after year 3.
The mortgage-rate mental model is wrong
When you take out a 30-year fixed mortgage at 6.5%, that rate is locked for the entire term. The bank can't raise it. That's how most buyers assume an FIA cap rate works.
It's not. FIA cap rates work like high-yield savings account rates.
When Marcus or Ally raises their HYSA rate from 4.0% to 4.5%, that's their choice — and they can drop it back to 4.0% the next month. The rate you saw when you opened the account is NOT the rate you keep forever. The bank can change it at any time.
FIA cap rates work the same way:
- The cap you see at purchase applies to the first crediting period only (typically year 1).
- At each anniversary, the carrier can reset the cap within the contractual minimum.
- If interest rates fall or the carrier's option budget tightens, your cap can drop dramatically — sometimes from 9% down to 3-4% over a few years.
Why caps change: the option-budget mechanics
Carriers don't print money to pay your index-linked credit. They take your premium, invest most of it in bonds at prevailing interest rates, and use the bond yield to buy S&P 500 call options that generate the index credit.
- Rates UP → bond yields rise → more option budget → higher caps possible
- Rates DOWN → bond yields fall → less option budget → caps get cut
The 2010-2021 low-rate environment crushed FIA caps across the entire industry. The 2022-2025 rate cycle restored them. Whatever cap you see today is a function of TODAY's interest rate environment — and that environment will change.
The minimum cap floor (the only real guarantee)
Every FIA contract has a minimum guaranteed cap stated in the contract. This is the LOWEST the cap can ever go. Common minimum caps:
- Some contracts: 1% minimum cap (essentially nothing)
- Better contracts: 2-3% minimum cap
- Top-tier products: 4%+ minimum cap
Read the minimum cap before signing. If it's 1%, your worst-case scenario is essentially 0% real returns for 10+ years.
How to evaluate a carrier's renewal practices BEFORE buying
The single best protection: ask the agent for the carrier's in-force renewal-rate history for the product you're being quoted. A carrier that's maintained competitive caps on existing contracts over 5+ years is much more trustworthy than one with no history (or worse, a history of cap cuts).
Carriers with the most consistent in-force renewal track records (industry consensus as of 2026): Athene, Allianz, Sammons (North American/Midland), American Equity, and Nationwide. These carriers have published renewal-rate histories that survive scrutiny.
Carriers without published renewal-rate histories OR with a history of cutting caps post-sale should be evaluated carefully — especially if the cap they're showing you today is near the top of the market.
The single most important questions to ask
- "What's the minimum guaranteed cap in this contract?"
- "Can you show me this product's in-force renewal-rate history for the last 5 years?"
- "What's the current cap on in-force contracts purchased in 2020, 2018, and 2015?"
- "If the cap drops to the minimum, what's my realistic annual credited return?"
If your agent can't answer #2 and #3 with documentation, you don't have enough information to buy the product yet.
Explain it like I'm 12 — how an FIA actually works
A Fixed Indexed Annuity (FIA) is a contract where the carrier credits you interest based on stock market index performance — but caps your upside AND protects your downside. You can never lose money from market drops; you also won't get the full upside in big bull years.
The math:
- Put $100,000 in an FIA with a 7% annual point-to-point cap on the S&P 500
- S&P returns 12% over the year: you get capped at 7% = $7,000 credited
- S&P returns 4% over the year: you get the full 4% = $4,000 credited
- S&P returns -20% over the year: you get 0% (principal protected)
The "fees" are hidden in the structure:
- No explicit fee on accumulation-only FIA (no income rider)
- The carrier funds your principal protection by capping your upside
- Surrender charges 7-15 years if you withdraw early
- 10% free withdrawal per year typically
Quick FIA FAQ
Q: Will the cap rate change after I buy?
A: Yes. Cap rates RENEW annually within contract minimums. The 7% cap you see at purchase can drop to 4% over time. Read the minimum guaranteed cap in your contract.
Q: Why is my cap lower than my friend's FIA?
A: Carriers trade cap rate for other features — premium bonus, longer surrender, income rider, brand prestige. Two FIAs with similar "headlines" can have very different actual structures.
Q: What is the "minimum guaranteed cap"?
A: The lowest the carrier can set the cap on your contract. Common minimums: 1-4%. If the minimum is 1%, your worst-case credited return is essentially 0% real after inflation.
Q: How are FIA gains taxed?
A: Tax-deferred during accumulation. At withdrawal: gains taxable as ordinary income. 10% IRS penalty on gain portion if withdrawn before 59½.
Q: Can I lose money?
A: Not from market drops (principal-protected). You CAN lose money from early surrender (penalty) or MVA adjustments. Stay to surrender period end = no loss possible.
Q: How long is the surrender period?
A: Varies — 7 years (Athene PEC 7 Plus), 10 years (most), 14-15 years (bonus products). Longer surrender typically buys you better caps or higher bonus.
Q: What's the difference between cap, participation rate, and spread?
A: Cap = maximum credited. Participation rate = % of index move credited. Spread = % subtracted from index move. Some products combine multiple. See How Annuity Crediting Actually Works.
Q: Should I add an income rider?
A: Only if you'll activate it for guaranteed lifetime income. Rider fee (0.85-1.50%/year) charged annually whether you use it or not. Many buyers pay rider fees for years and never activate.
📩 Get a second opinion before you sign — this is a big decision
Talk to a licensed independent expert. Hans.
Fixed indexed annuities are committed for 7-15 years. Cap rates renew annually and can drop. Income riders have separate benefit bases that aren't cash. Get an independent review before you commit your retirement savings to a multi-year contract.
Drop your info — within 24 hours, you'll get a written independent review of your quote, side-by-side comparisons vs. 2 alternatives, and a no-pressure 15-minute call if you want one.
📞 Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed insurance producer appointed with multiple A-rated carriers
By submitting, you agree to receive calls and texts from Hans Goldstein. Msg/data rates apply. Reply STOP to opt out. Privacy Policy.
Disclosure
This review reflects publicly available product materials and approximate rates as of the date stated above. Annuity rates, caps, participation rates, payout factors, crediting methods, and long-term care benefit structures change frequently — typically monthly. Always confirm current values against the most recent carrier disclosure document and the actual contract before purchasing. This article is general information for educational purposes; it is not a personalized recommendation, solicitation, or offer of any specific product. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated carriers across the annuity and long-term care insurance market; the producer's specific appointment status with the carrier discussed in this review may vary, and this review is not an endorsement or representation of carrier appointment. No compensation has been received from any carrier in connection with the publication of this review. Always read the actual contract and consult a licensed advisor before purchasing any annuity or long-term care insurance product. Past index performance does not predict future credited interest. Annuities and hybrid life+LTC policies are long-term contracts with surrender charges; they are not suitable for funds you may need before the end of the surrender period. AM Best ratings and tax treatment are subject to change. Tax discussion of IRC §7702B, §1035, and the Pension Protection Act of 2006 reflects law as of 2026 and is subject to change.