Product Comparison Published: 2026-10-03

MYGA vs Bond Fund: Which Holds Up When Rates Move?

Written by Hans Goldstein, independent licensed insurance producer · CA license 4273294 · NPN 20602398
Published October 3, 2026

Short answer: a bond fund has no maturity date, so its price moves with interest rates: a fund with a 6-year duration loses roughly 6% of its value for every 1-point rise in rates. A MYGA locks a rate, 5.80% to 6.00% for 5 years at A-rated insurers in late September 2026, and its value only goes up while you hold it. The bond fund wins on daily liquidity and has no surrender charge; the MYGA wins on certainty and tax deferral for money with a known time horizon.

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The difference in one sentence

An individual bond or MYGA has a maturity date where you get a known amount back. A bond fund never matures; it keeps buying new bonds, so your value on any given day depends on where rates are that day.

2022 showed the gap

The 5-year Treasury par yield went from 1.26% on December 31, 2021 to 3.99% on December 30, 2022, and the 10-year from 1.52% to 3.88% (U.S. Treasury yield curve data). A rise of about 2.5 to 2.7 points in a year, against a typical intermediate bond fund duration of 5 to 7 years, means price declines in the low to mid teens before income. A MYGA bought at the end of 2021 kept crediting its rate all year.

Side by side

	MYGA	Intermediate bond fund
Yield today	5.80% to 6.00% (5-yr, A-rated, Sept 24, 2026)	Varies by fund; 5-yr Treasury 5.06% on October 2, 2026
Value when rates rise	No change, keeps crediting	Falls by about duration × rate rise
Known value at a future date	Yes	No
Liquidity	Free withdrawal allowance; surrender charge above it	Daily at market price
Costs	None deducted; built into the rate	Expense ratio
Tax	Deferred until withdrawn	Dividends taxed yearly; gains or losses on sale
Backing	Insurer + state guaranty association	The bonds in the fund; not insured

Rate-shock calculator: MYGA vs your bond fund

Amount ($)

MYGA rate (%)

Fund yield (%)

Fund duration (yrs)

Rate change after year 1 (points)

Years held

Approximation: price change = −duration × rate change, applied once at the end of year 1, then the fund earns the new yield; ignores convexity, credit spreads, expenses and taxes. Default fund yield = 5-year Treasury par yield on October 2, 2026; enter your fund’s SEC yield and duration from its fact sheet. MYGA default = one A-rated insurer’s 5-year rate card effective September 25, 2026.

When the bond fund is the better fit

You may need the money any day and can live with price swings.
You expect rates to fall: fund prices rise when rates drop (try a negative rate change above).
The money is inside a 401(k) where a MYGA is not offered.

For the government-backed version of this comparison see annuity vs Treasury bonds and 5-year Treasury vs 5-year MYGA. If you are using bonds to protect the years around retirement, the bond tent and income floor piece covers how I would structure it.

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Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed insurance producer appointed with multiple carriers

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Frequently Asked Questions

Is a MYGA safer than a bond fund?

For a known time horizon, yes in one important way: a MYGA's value does not fall when interest rates rise, while a bond fund's price drops by roughly its duration times the rate increase. A bond fund is more liquid and is not tied to one insurer.

Why did bond funds lose money in 2022?

Interest rates rose sharply. The 5-year Treasury yield went from 1.26% at the end of 2021 to 3.99% at the end of 2022, and bond prices fall when yields rise. Funds with 5 to 7 year durations saw double-digit price declines before income.

Do bond funds or MYGAs pay more right now?

In late September 2026 A-rated 5-year MYGAs paid about 5.80% to 6.00%, above the 5-year Treasury yield of 5.06% on October 2, 2026. A bond fund's yield depends on its holdings; check its SEC yield.

How are MYGA and bond fund returns taxed?

MYGA interest is tax-deferred until withdrawn, then taxed as ordinary income. Bond fund dividends are taxed each year and selling shares can create a capital gain or loss.

Sources

Goldstein & Co. LLC dba Goldstein Insurance Services, CA lic. #4273294 · Hans Goldstein, NPN 20602398 · 213-414-2808 · hans@hansgoldstein.com

Rates: A-rated-or-better 5-year MYGAs 5.80% to 6.00% (AnnuityRateWatch carrier rate data, September 24, 2026); Treasury par yields from the U.S. Treasury for October 2, 2026; CD, savings and money market figures from DepositAccounts, bank and fund sites, September 23 to 25, 2026. Rates change often; confirm before you act.

This page is general education. It is not tax, legal or investment advice and is not an offer or recommendation for any specific product. Calculator results are estimates from the stated assumptions, not quotes. Guarantees in a fixed annuity are contractual and are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are not FDIC insured. Annuities have surrender charges and other limitations; read the contract and disclosure before you buy. Consult a tax professional or attorney about your situation.