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Annuity Review Carrier: Multiple AM Best: N/A, educational piece Last updated: 2026-10-18

Annuity vs CD: MYGA vs Bank CD Comparison 2026

Hans Goldstein, licensed insurance producerWritten & reviewed by , Independent Licensed Insurance Producer · CA license 4273294 · NPN 20602398
Admitted to practice before the IRS
Independently reviewed & last updated 2026-10-07

Short answer

MYGA vs CD: which pays more in 2026?

Right now a MYGA usually pays more: A-rated 5-year MYGAs topped out around 5.50% to 6.05% (public carrier rate sheets, October 14, 2026), while the best nationally available 5-year CDs paid 4.70% to 5.00% APY (Bankrate and Popular Direct, October 18, 2026). A MYGA also defers tax until you withdraw. A CD wins on FDIC insurance, smaller deposits and shorter, cheaper exits; a MYGA rate is guaranteed backed by the claims-paying ability of the issuing insurer and backed up by a state guaranty association.

Both charge a penalty if you leave early, so match the term to when you need the money.

Last updated: October 7, 2026

Rates change often. Get an email when they do. Figures in this article are kept for context, not as today’s rate; confirm with the insurance carrier before you decide. For reference (latest checks, September 2026): A-rated 5-year MYGAs topped out around 5.50% to 6.05% (public carrier rate sheets, October 14, 2026); and the best nationally available 5-year CDs paid 4.70% to 5.00% APY (Bankrate and Popular Direct, October 18, 2026).Get an email when MYGA rates change →

If you're considering a Multi-Year Guaranteed Annuity (MYGA) vs. a bank CD for your conservative money, the answer isn't obvious. Both guarantee a rate. Both have penalties for early withdrawal. Both are insured (different mechanisms). Here's the honest breakdown of when MYGA beats CD and when CD wins.

Carrier Financial Strength Ratings · Multiple
AM Best
Varies
S&P
Varies
Moody's
Varies
Fitch
Varies
Weiss
Varies
KBRA
n/a
Rating note: Multi-carrier comparison piece. Individual carrier ratings linked from each product reference in this review.
Renewal Rate Integrity: N/A, Fixed at Issue
SPIA and pure MYGA products have rates locked at issue; no renewal risk during the guarantee period.
Why this matters: A MYGA’s rate is fixed for its guarantee period. When the term ends, the carrier sets the renewal rate. A carrier with strong renewal integrity keeps renewal rates close to what new buyers get; a weak one lets them slide toward the contract minimum, so plan to shop or do a 1035 exchange at maturity. See full research →
Customer Service: Varies
This comparison covers multiple carriers; see individual product reviews for carrier-specific ratings.
Why this matters: Your agent may not always be available, and after the sale, the carrier becomes your direct service point. Long hold times, hard-to-reach reps, and unresponsive claims teams can turn a simple change-of-beneficiary or income-rider activation into a multi-week ordeal. Rating reflects publicly reported buyer experience and industry chatter as of 2026.
Ratings reflect publicly-reported AM Best, S&P, Moody's, Fitch, Weiss, and KBRA assessments as of 2026. COMDEX is a composite percentile score (0-100) combining major agency ratings; 90+ is among the strongest carriers, 60 to 75 is solid, below 60 warrants additional due diligence. Weiss Ratings uses a stricter consumer-focused scale than agency ratings; a Weiss B is typically equivalent to an agency A−. Always confirm current ratings against carrier filings before purchasing.
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Hans Goldstein, EA
Admitted to practice before the IRS

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30-second summary

Question Answer
Higher rate in 2026? MYGA: typically 1-2 percentage points higher
Better safety? CD (FDIC insured up to $250K); a MYGA relies on the insurer's claims-paying ability
Better tax treatment? MYGA: tax-deferred growth
Better liquidity? CD: shorter terms typical, lower early-withdrawal penalty
Better for emergency funds? CD or money market; don't use MYGAs for emergency money
Better for retirement income? MYGA: longer terms + tax-deferral

CD vs MYGA, after tax

What $100,000 earns in 5 years: CD vs MYGA, after tax

Rates used: CD 5.00%, the top nationally available 5-year CD (Bankrate, October 14, 2026); change it to the rate you are offered. MYGA 5.95%, the best A-rated rate we track as of October 13, 2026: Delaware Life Pinnacle Plus 5-year (AM Best A-, negative outlook, 7/31/2026), $100,000 and up, effective October 6, 2026 (Delaware Life rate sheet).

CD, interest taxed every year$121,081
MYGA, tax-deferred, before tax$133,507
MYGA after paying tax on all the interest at withdrawal$126,136
Tax deferral alone adds about$674
MYGA ahead of the CD, after tax$5,055

Assumes 22% federal and 0% state income tax, no withdrawals, rates held for the whole term. MYGA interest is taxed as ordinary income when you withdraw it, not as capital gains. Gains taken before age 59 1/2 can owe a 10% IRS penalty, and cashing out early can cost a surrender charge. In an IRA both grow tax-deferred, so the edge there is the rate alone. Bank and credit union deposits are FDIC or NCUA insured up to the limits; a MYGA is backed by the issuing insurer's claims-paying ability and your state's guaranty association up to its limits, not the FDIC. General education, not tax, legal or financial advice.

Side-by-side comparison

Feature Bank CD MYGA Annuity
Rate guarantee Yes, fixed for term Yes, fixed for term
2026 rate range 4.0%-5.0% (3-mo to 5-yr) 5.0%-6.5% (3-yr to 10-yr)
Term options 3 mo, 6 mo, 1 yr, 2 yr, 5 yr 3 yr, 5 yr, 7 yr, 10 yr
Tax treatment Interest taxed ANNUALLY (1099-INT) Tax-deferred until withdrawal
Early withdrawal penalty 3-6 months interest 5-10% surrender charge (first year)
Free withdrawal None (full surrender or none) Typically 10% per year
Min deposit $500-$10,000 $5,000-$25,000
Insurance FDIC ($250K per depositor) Insurer's claims-paying ability (check AM Best / S&P rating)
Issuer Bank Insurance company
Death benefit Account value to heir Account value to heir
Liquidity at maturity Renew or withdraw freely Renew or withdraw freely; auto-renewal common

The rate advantage: why MYGAs pay more

Banks make money on the spread between deposit rates (what they pay you) and loan rates (what they charge borrowers). They have to keep deposit rates competitive but not too high to preserve margin.

Insurance carriers invest premiums in long-duration bond portfolios. They can match the duration of MYGA obligations to bonds, capturing the term premium. They're not lending to consumers, so they don't need a banking-style spread.

Result: MYGAs typically pay 1.0-2.0 percentage points more than bank CDs of similar duration in 2026.

The tax advantage: quietly significant

Bank CD: You earn interest annually. You pay tax annually on the interest (1099-INT). Even if you don't withdraw, you owe tax.

MYGA: Interest accrues tax-deferred. You owe NO tax until you withdraw.

Over a 5-year MYGA at an illustrative 5.5% vs. a 5-year CD at 4.5%, the tax-deferral advantage compounds:

$100K, 5 years, 24% federal bracket:

Year CD after tax (4.5% gross) MYGA pre-tax (5.5%) MYGA advantage
1 $103,420 $105,500 +$2,080
2 $106,956 $111,303 +$4,347
3 $110,614 $117,424 +$6,810
4 $114,400 $123,883 +$9,483
5 $118,319 $130,696 +$12,377

At MYGA maturity year 5, you pay tax on the $30,696 of accumulated gain. Net after-tax: ~$123,329.
CD final after-tax (already taxed annually): $118,319.

MYGA wins by ~$5,000 on a $100K commitment over 5 years: even with the same rates. With MYGAs paying 1+ points more, the gap widens to $15-25K.

The safety comparison

FDIC (banks)

Insurer claims-paying ability (annuities)

Practical difference for retail buyers: a CD's protection comes from the federal government; a MYGA's comes from the financial strength of the insurer. That makes the carrier's rating the key safety check on a MYGA, and splitting a large purchase across two highly rated carriers (or two banks) spreads the risk.

When CD beats MYGA

✅ You might need the money within 5 years: CD penalties are typically 3-6 months interest; MYGA surrender charges are 5-10% of principal.

✅ You want true liquidity: many banks offer no-penalty CDs or short-term CDs. MYGAs are locked.

✅ You're under 59½: MYGA gain withdrawals before 59½ trigger a 10% IRS penalty on top of regular tax. CDs don't have this restriction.

✅ You're in a low/0% federal tax bracket: tax-deferral provides little benefit if you'd pay no tax anyway.

✅ You're putting in less than $10K: most MYGAs have $5K-$25K minimums; CDs often start at $500-$1,000.

✅ You value brand familiarity: Chase, Wells Fargo, Marcus, Ally are household names.

When MYGA beats CD

✅ Higher rate matters: 1-2 percentage points compounded over 5-10 years is meaningful ($5K-$25K on $100K).

✅ Tax-deferral helps: you're in a high tax bracket and want to delay the tax.

✅ You have 5+ year horizon: funds won't be needed before term end.

✅ You're 59½ or older: no premature distribution penalty risk.

✅ You want longer term: 7-year and 10-year MYGAs are available; CDs typically max at 5 years.

✅ You want retirement income optionality: MYGAs can convert to SPIAs (lifetime income) at maturity tax-free under §1035.

Real-world example

Robert, 67, has $300,000 in cash he will not need for 7 years. He keeps $100,000 in a money market for emergencies either way, so the comparison is the other $200,000, split $100,000 and $100,000. Same 24% federal bracket, no state tax, rates read October 2026 (sources under the horizon table below). Hypothetical, not a quote.

Option A (CD ladder). CD interest is taxed every year, so the after-tax rate compounds. Each CD renews at the same rate for the rest of the 7 years; that is an assumption, not a forecast.
• $100,000 in a 5-year CD at 5.00% APY (Popular Direct, Bankrate, October 18, 2026): $100,000 × (1 + 0.05 × (1 − 0.24))7 = $100,000 × 1.0387 = $129,832 after tax
• $100,000 in a 3-year CD at 4.85% APY (Popular Direct, October 13, 2026): $100,000 × (1 + 0.0485 × 0.76)7 = $100,000 × 1.036867 = $128,837 after tax
• Total after tax, 7 years: $129,832 + $128,837 + $100,000 money market = $358,669

Option B (MYGA ladder). MYGA interest is taxed once, at withdrawal, so the full balance compounds. Each MYGA renews at the same rate for the rest of the 7 years; again an assumption.
• $100,000 in Athene MaxRate 5-year at 6.05% ($100,000+, rate card effective October 14, 2026): $100,000 × 1.06057 = $150,860. Gain $50,860 × 24% = $12,206 tax. After tax: $138,654
• $100,000 in Athene MaxRate 3-year at 5.75% (same card): $100,000 × 1.05757 = $147,898. Gain $47,898 × 24% = $11,495 tax. After tax: $136,403
• Total after tax, 7 years: $138,654 + $136,403 + $100,000 money market = $375,056

The MYGA ladder finishes ahead by $16,387 ($375,056 − $358,669), about 4.6% more than the CD ladder on the same $300,000. The gap comes from the rate difference (about 1 point) plus deferral. It shrinks if CD rates rise at renewal and grows if they fall; a MYGA is only as good as the carrier, so check the AM Best rating, surrender schedule and market value adjustment first.

CD vs MYGA by horizon: 3, 5, 7 and 10 years on $250,000

The same $250,000, the same 24% federal bracket and no state tax, run at four horizons with rates read in October 2026. The MYGA interest is taxed once, at withdrawal. The CD interest is taxed every year and the after-tax interest compounds. These are hypotheticals built on dated rates, not quotes, and your state, bracket and deposit size will move them.

HorizonMYGA usedCD usedMYGA after taxCD after taxMYGA ahead byCD APY needed to tie
3 yearsAthene MaxRate 3-year, 5.75%Popular Direct 3-year, 4.85% APY$284,696$278,677+$6,0195.83%
5 yearsAthene MaxRate 5-year, 6.05%Popular Direct 5-year, 5.00% APY$314,863$301,250+$13,6136.21%
7 yearsAthene MaxRate 7-year, 6.15%5-year CD renewed at 5.00%$348,532$324,580+$23,9526.40%
10 yearsDelaware Life Pinnacle Plus 10-year, 5.85%5-year CD renewed at 5.00%$395,477$363,006+$32,4716.18%

Sources and dates. Athene MaxRate: $100,000+, most states, rate card effective October 14, 2026 and still on Athene's current-rates page October 18, 2026 (athene.com). Delaware Life Pinnacle Plus 10-year: $100,000+, rate sheet effective October 6, 2026, re-read October 18. CDs: Popular Direct 3-year 4.85% APY (Bankrate, as of October 13, 2026) and 5-year 5.00% APY, the top rate on Bankrate October 18, 2026. Few banks sell a CD past five years, so the 7 and 10-year rows assume a 5-year CD that renews at today's 5.00% with no change; that is an assumption, not a forecast. Rates vary by state and deposit size and change often.

What the horizon table shows

The comparison above is only as good as the carrier behind the MYGA. Check the AM Best rating, the surrender schedule and any market value adjustment first; MYGA rates has the current carrier rate sheets and how to compare carriers, and best 5-year MYGA rates lists 15 contracts with their ratings.

Pressure-test the comparison

  1. "What's the actual MYGA rate vs. the CD rate I'm being offered?": Compare same-term.
  2. "What's the tax bracket I'm in? Will tax-deferral matter?": High brackets benefit more.
  3. "Do I need this money before the term ends?": If yes, CD wins on liquidity.
  4. "Am I under 59½?": Avoid MYGAs to skip the 10% IRS penalty.
  5. "What are this carrier's AM Best and S&P ratings?": the insurer's claims-paying ability is what backs a MYGA.

Featured MYGA reviews

How a MYGA works, in plain terms

A MYGA (Multi-Year Guaranteed Annuity) works like a CD from an insurance company. You give the carrier money for a fixed term (3, 5, 7, or 10 years). The carrier guarantees a specific interest rate for that entire term. At maturity, you get your money plus accumulated interest back, or you renew or convert to another product.

The math (MYGA rate as of October 14, 2026, CD rate as of September 24, 2026):
• Put $100,000 in a 5-year MYGA at 5.50%, the low end of what A-rated carriers paid (public carrier rate sheets)
• At year 5 maturity: ~$130,700 (compound growth, no tax until withdrawal)
• Same $100K in a 5-year CD at 4.50% APY, the top national rate (DepositAccounts), taxed each year at 24%: ~$118,300

Why MYGA beats CD:
• Higher rate (about 1.0 to 1.7 points over the best 5-year CDs on September 24, 2026)
• Tax-deferred growth (you owe tax only at withdrawal)
• Terms out to 10 years at a fixed rate

The trade-off:
• Surrender charges if you withdraw before maturity (5-10% typical)
• Free withdrawal of 10% per year (usually) for emergencies
• Locked-in rate for the term. If rates rise after you buy, you're stuck at the lower rate
• IRS 10% penalty on gain portion if withdrawn before age 59½

The only "fee" is built into the contract, with no separate annual fee.

Quick MYGA FAQ

Q: Is a MYGA safer than a CD?
A: They protect you differently. A CD is FDIC insured up to federal limits. A MYGA is backed by the claims-paying ability of the issuing insurance company, so the carrier's financial strength rating matters. Check its AM Best and S&P ratings before you commit.

Q: What happens at maturity?
A: You typically have 30 days to elect: renew at the carrier's then-current rate, withdraw cash, transfer (§1035) to a different annuity, or annuitize for lifetime income. Don't miss the window. Many carriers auto-renew if you don't elect.

Q: Can I §1035 exchange to a different MYGA at maturity?
A: Yes, a tax-free direct transfer to a new annuity, including a different carrier offering better rates.

Q: What about MVA (Market Value Adjustment)?
A: Some MYGAs have MVA. If you surrender early when rates have RISEN, MVA reduces your surrender value further. If rates have FALLEN, MVA can increase it.

Q: Should I ladder MYGAs?
A: For larger purchases, yes. Splitting across 3-year, 5-year, 7-year locks in rates at multiple maturity dates and gives flexibility to capture future rate moves.

Q: How is MYGA interest taxed?
A: Inside the contract: tax-deferred. At withdrawal (non-qualified): only the gain is taxable as ordinary income. Inside an IRA: standard IRA rules apply.

Q: Can I lose money on a MYGA?
A: Not from market loss (no market exposure). You CAN lose money from early surrender charges + MVA. Held to maturity, the rate is contractually set by the insurer, subject to its claims-paying ability.

Q: Is the rate locked for the full term?
A: Yes. Some MYGAs have a "1-year rate" then "renewal rate" structure, so be sure you understand whether the full term is at one rate or steps down.

More on the Annuity vs CD Decision

If the money is in an IRA

Inside an IRA the MYGA's tax deferral adds nothing, because the account is already tax-deferred. The comparison is simply rate against rate, term against term, and penalty against penalty. Under 59 and a half, both an IRA CD and an IRA annuity carry the 10% IRS penalty on early withdrawals; the CD's bank penalty is usually the cheaper of the two to break.

The $100,000, 24% bracket math

Using September 24, 2026 figures (top 5-year CD at 4.50% APY per DepositAccounts; 5.50%, the low end of the A-rated 5-year MYGA range per public carrier rate sheets), non-qualified money, state tax ignored:

5-year CD at 4.50%5-year MYGA at 5.50%
After-tax yield while it growsabout 3.42% (tax paid every year)5.50% (tax deferred)
Value after 5 yearsabout $118,300 after tax$130,696 before tax
Tax if all withdrawn in year 5already paid$7,816
Net after taxabout $118,300about $123,329

The MYGA nets about $5,000 more on the same $100,000 in this example. The gap widens in higher brackets and longer terms, and shrinks toward rate-only in a low bracket. These are past-date figures kept for context, not today's rates.

At death and at maturity

Laddering with MYGAs instead of CDs

The CD-ladder idea works with MYGAs too, with fewer rungs because most MYGAs allow about 10% a year out without a surrender charge. A setup I often sketch: 30% in a high-yield savings account for instant access, 30% in a 3-year MYGA and 40% in a 5-year MYGA. Most of the money earns MYGA rates and each MYGA still has its free-withdrawal allowance if something comes up.

Above the guaranty limit

FDIC covers $250,000 per depositor, per bank, per ownership category. State life and health guaranty associations set their own annuity limits per owner, per insurer: commonly $250,000, with some states higher (New York $500,000) and California at 80% of the value up to $250,000. Larger amounts are usually split across two or three highly rated insurers, the same way you would split CDs across banks.

Fixed indexed annuities are not the CD comparison

A fixed indexed annuity also protects principal from market losses, but its credited interest moves with an index, subject to caps and participation rates that the insurer can reset. That makes it a different product with a different job. If you are shopping CD rates, the like-for-like comparison is the MYGA: fixed rate, fixed term, no caps.

Other safe-money options worth pricing

What to check before you sign either one

On the MYGA: the surrender schedule year by year, whether there is a market value adjustment, the free-withdrawal allowance, whether the rate holds for the whole term or steps down, and the insurer's financial strength ratings. On the CD: whether it is callable, the early-withdrawal penalty, and whether the advertised rate needs a minimum balance or a linked account.

The most common mistake I see is buying a term longer than the money's actual job. A 7-year MYGA on money you need in four years is worse than a 4-year CD, no matter what the rate sheet says.

My rule of thumb

Rates referenced on this page: public carrier rate sheets (MYGAs, October 14, 2026) and DepositAccounts (CDs, September 24 to 25, 2026). Rates change often; confirm current rates for your state before you decide. A MYGA's rate is guaranteed, backed by the claims-paying ability of the issuing insurer.

MYGA or CD for an emergency fund? Neither: what $25,000 costs to get out early

An emergency fund needs same-day access, no penalty and a stable balance. Yield comes fourth. Here is what pulling $25,000 out early costs in each vehicle, using an illustrative 5-year MYGA schedule (9, 8, 7, 5, 3%) and a 5-year CD at 4.50% (rates below are illustrations, not quotes):

Where the $25,000 sitsCost to take it out earlyTime to cash
5-year MYGA, year 1 (9% charge)$2,2505-15 business days from request to wire
5-year MYGA, year 3 (7% charge)$1,7505-15 business days
5-year MYGA, year 5 (3% charge)$7505-15 business days
5-year CD at 4.50%, 180-day interest penaltyabout $5551-3 business days
5-year CD at 4.50%, 365-day interest penaltyabout $1,1251-3 business days
High-yield savings account$0Same day to 1 business day

The 10% free withdrawal helps but has hard limits. In year 1 of a $250,000 MYGA, a $25,000 emergency comes out free; a $50,000 emergency is $25,000 free plus $25,000 at 9%, a $2,250 charge. The allowance is 10% per contract year, not per emergency, and the interest portion is taxed as ordinary income (plus the 10% additional federal tax before 59½). Many CDs must be broken whole rather than partly, and no-penalty CDs usually pay less than the same bank’s regular CD.

How I lay out cash by job:

LayerJobVehicleTypical size
1. Operating cashMonthly billsChecking1 month of expenses
2. Emergency reserveJob loss, medical bill, home or car repairHigh-yield savings or Treasury money market fund3-12 months of essential expenses (3 for stable dual income, 6 single income, 9-12 self-employed or 50+, 12+ near or in retirement)
3. Known expenses in 1-3 yearsTuition, car, taxesCD, T-bill ladder or no-penalty CDSized to the expense
4. Patient money, 3-7 yearsGrowth at a fixed rateMYGA ladderThe bulk of the conservative bucket
5. Lifetime incomeIncome floor in retirementSPIA, often by 1035 exchange from a MYGAWhen you need it

If the only liquid money you have is a MYGA, you do not have an emergency fund. Build layer 2 first, then put longer-horizon money in MYGAs. Anyone who calls a MYGA’s 10% free withdrawal “just like a savings account” is selling you something.

Sources



Hans Goldstein, NPN 20602398

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Disclosure

This review is based on the carrier's public product materials and rates as of the date shown above. Annuity rates, caps, participation rates, payout factors, crediting methods, and long-term care benefit structures change often, sometimes monthly. Confirm current figures in the latest carrier disclosure and the contract before you buy. This is general education, not a personal recommendation or an offer of any product. Hans Goldstein is an independent licensed insurance producer (CA license 4273294, NPN 20602398) appointed with several A-rated carriers. His appointment with the carrier reviewed here may vary, and this review is not an endorsement. No carrier paid for 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.

Goldstein Complexity Index

Every annuity I review gets a complexity score from 0 to 100. Higher means harder to understand. Complexity is where buyers get hurt: riders they didn't know they were paying for, surrender charges that surprise them, and income "benefit bases" they took for cash. SPIAs and MYGAs score low. Products that stack a bonus, an income rider, an MVA and several crediting options score high.

This product's score: 13/100, 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 3/10 How many riders, optional or built in (income, death benefit, LTC). Each one adds cost and one more thing to understand.
Crediting strategies 2/10 How many index options (cap, spread, participation rate, step rate, volatility-controlled indices). More choices are harder to follow.
Surrender complexity 3/10 Length of the surrender period, plus any MVA and bonus recapture. The longer and more layered it is, the harder it is to know what leaving early costs.
Benefit-base separation 2/10 Whether there is a separate income base ("PIV") that is not cash but looks like it. This causes more buyer confusion than anything else.
Bonus structure 1/10 A premium bonus with a recapture schedule. The bonus is real, but you can lose part of it if you leave early.

How to read this

Why it matters: nobody gets sued for selling a complicated product, but buyers regret them all the time. An annuity that wins your money in year one and confuses you for the next 14 is worse than a simpler one you understood from the start. Simple products are easier to check.

Quick FAQ

Q: Is this annuity right for me?
A: It depends on when you need the money. A MYGA fits money you can leave alone for the full guarantee term, usually 3 to 10 years, when you want a fixed rate with no market exposure. It is the wrong place for an emergency fund or for money you may need before the term ends.

Q: How does an annuity actually pay out?
A: Three ways: (1) Surrender: withdraw cash, with a surrender charge if you leave before the term ends. (2) Annuitization: convert the value to a lifetime or fixed-period income stream. (3) 1035 exchange: move the money to another annuity at the end of the term without triggering tax.

Q: What happens if the carrier goes out of business?
A: An annuity is backed by the claims-paying ability of the issuing insurance company. The carrier's AM Best rating signals failure probability; A-rated carriers have very low historical default rates.

Q: Can I lose money in this annuity?
A: Not from the market: the rate is fixed for the term. You can lose money by surrendering early, through the surrender charge and a market value adjustment if the contract has one. Hold to the end of the term and neither applies.

Q: How much commission does the agent make?
A: Typically 4% to 8% of premium for fixed indexed annuities, paid by the carrier (not from your money). Higher commission products often have longer surrender periods or smaller caps. The product cost to you is the same whether commission is high or low, but commission size is a useful proxy for product complexity.

Q: Should I roll over my 401(k) into an annuity?
A: Sometimes yes, often no. Yes if: you want guaranteed income, you're risk-averse, you have other liquid assets for emergencies, and you're 55+. No if: you're under 50, you need liquidity, you have plenty of pension/SS income, or you'd be putting all your retirement assets into one product. Get an independent second opinion before rolling over six figures.

Q: Why are caps so different across products?
A: Trade-offs. Higher cap = lower bonus, longer surrender, lower-rated carrier, or different index strategy. There's no free lunch. A 10%+ cap typically means B-rated carrier + 14-year surrender. A 6% cap typically means A+ carrier + shorter surrender.

Q: How are annuity earnings taxed?
A: Inside the contract, growth is tax-deferred (no tax until you withdraw). Withdrawals are taxed as ordinary income (not capital gains). For non-qualified annuities, only the gain portion is taxable. For qualified (IRA) annuities, the entire withdrawal is taxable. There's a 10% IRS penalty on withdrawals before age 59½.

Goldstein Complexity Index

Every annuity I review gets a complexity score from 0 to 100. Higher means harder to understand. Complexity is where buyers get hurt: riders they didn't know they were paying for, surrender charges that surprise them, and income "benefit bases" they took for cash. SPIAs and MYGAs score low. Products that stack a bonus, an income rider, an MVA and several crediting options score high.

This product's score: 13/100, 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 3/10 How many riders, optional or built in (income, death benefit, LTC). Each one adds cost and one more thing to understand.
Crediting strategies 2/10 How many index options (cap, spread, participation rate, step rate, volatility-controlled indices). More choices are harder to follow.
Surrender complexity 3/10 Length of the surrender period, plus any MVA and bonus recapture. The longer and more layered it is, the harder it is to know what leaving early costs.
Benefit-base separation 2/10 Whether there is a separate income base ("PIV") that is not cash but looks like it. This causes more buyer confusion than anything else.
Bonus structure 1/10 A premium bonus with a recapture schedule. The bonus is real, but you can lose part of it if you leave early.

How to read this

Why it matters: nobody gets sued for selling a complicated product, but buyers regret them all the time. An annuity that wins your money in year one and confuses you for the next 14 is worse than a simpler one you understood from the start. Simple products are easier to check.

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Hans Goldstein is an Enrolled Agent, admitted to practice before the Internal Revenue Service. Not affiliated with or endorsed by the IRS. General education, not tax or legal advice for your situation.