MYGA Monthly Income Calculator — Interest-Only Without Touching Principal
TL;DR: Take the interest, leave the principal alone. A $500,000 MYGA at 5.85% generates $2,438/month in interest you can withdraw without surrender charges (well inside the 10% free-withdrawal allowance). Enter your principal and rate to see your monthly pre-tax and after-tax income.
How this calculator works
The formula is straightforward:
Monthly interest = Principal × Rate / 12
For example, $500,000 × 0.0585 / 12 = $2,438 per month.
The calculator also checks this against the carrier's free-withdrawal limit (typically 10% of account value per year). If your annual interest is under the cap, you can withdraw it monthly without any surrender charge or penalty — just standard income tax on the gain portion.
After-tax monthly is computed by applying your federal bracket to the pre-tax monthly figure. We don't apply state tax in this view because some states (FL, TX, NV, WA) don't tax annuity withdrawals at all, while others (CA, NY) tax in full — varies too widely to display a single number.
What the result means
Pre-tax monthly is what hits your bank account before any tax withholding. Most carriers will let you elect tax withholding at issue or with each withdrawal request — 10% federal withholding is the default for non-qualified annuity gain.
After-tax monthly is what you actually keep, assuming you're paying tax in the year of withdrawal. For non-qualified MYGAs, only the gain portion is taxable. If you're withdrawing only the annual interest (not principal), 100% of the withdrawal is gain — fully taxable.
Annual interest is the full-year figure. This is the amount you'll need to report on your tax return (typically a 1099-R from the carrier).
Free-withdrawal cap is 10% of account value per year on most MYGAs. As long as your annual interest is at or under this cap, you can pull it all without any surrender charge. At high rates, some products' interest exceeds 10% — that's rare but check the surrender charges if it happens.
When MYGA wins / when the alternative wins
MYGA monthly income wins for: retirees with $250K+ in taxable money who want guaranteed monthly cashflow but don't want to surrender liquidity or principal control. Common ages: 60-75.
SPIA wins for: someone who wants the highest monthly check possible and doesn't care about preserving principal for heirs. SPIA at 65 pays roughly 6% of premium annually — about 30% more monthly income than MYGA interest-only.
Dividend stocks win for: someone willing to accept market volatility and dividend cuts in exchange for inflation-adjusted income over a long retirement.
Treasury ladder wins for: someone who wants monthly cashflow AND state-tax-free interest (T-bills are federal-only taxable).
Worked example
Scenario: 70-year-old widow in Texas with $400,000 to generate monthly income, doesn't want to touch principal.
- Principal: $400,000
- Rate: 5.65% (top A-rated 5-year MYGA, June 2026)
- Bracket: 22%
- State: Texas (no state income tax)
Monthly interest: $400,000 × 0.0565 / 12 = $1,883 pre-tax.
After-tax: $1,883 × (1 - 0.22) = $1,469 net per month.
Free-withdrawal cap: $400,000 × 10% = $40,000 / year ceiling. Annual interest = $22,600. Well within cap — no surrender charge concern.
End of 5 years: If she takes all interest as income, principal stays at $400,000. She can renew or move into the next MYGA without surrender charge.
Common mistakes
- Withdrawing more than 10%. Anything above the free-withdrawal cap triggers surrender charges during the surrender period. Stick to interest-only and you're safe.
- Forgetting the under-59½ penalty. IRS adds 10% on the gain portion if you withdraw before 59½. Plan accordingly.
- Auto-investing the withdrawal at the bank. If the money flows straight back into a taxable account earning less, you've defeated the deferral. Pay your bills with it — that's the point.
- Not setting up the systematic withdrawal at issue. Most carriers let you elect monthly/quarterly/annual interest payouts at policy issue with no surrender impact. Set it up upfront.
- Confusing interest-only with annuitization. Annuitization = giving up principal access in exchange for a higher monthly check. Interest-only = keeping full principal access but smaller monthly check. Different products, different math.
Related calculators & reviews
- MYGA Growth Calculator
- MYGA vs CD After-Tax Calculator
- Annuity Payout Calculator
- Social Security Bridge Calculator
- RMD + Annuity Calculator
FAQ
Q: Does taking monthly interest reduce my principal?
A: No. As long as the interest you withdraw equals or is less than the interest credited, principal stays intact for the full term.
Q: Can I stop and restart the monthly payments?
A: Yes. Most carriers allow you to change or pause systematic withdrawals at any time with a form. Some allow online toggling.
Q: Is the monthly payment guaranteed?
A: The rate is guaranteed for the term. Your monthly interest is guaranteed at that rate × principal. It won't drop unless you withdraw principal.
Q: What if I want more than the interest each month?
A: You can withdraw up to 10% of account value per year (most carriers) without surrender charge. Beyond that, surrender fees apply during the surrender period.
Q: Does interest-only count toward an RMD on a qualified MYGA?
A: Yes — for IRA-funded MYGAs, the interest withdrawal counts against your RMD as long as it's at least the RMD amount. If interest is less than RMD, you must supplement from elsewhere.
Q: How is the monthly payment taxed?
A: On a non-qualified MYGA, withdrawals are LIFO — gain comes out first and is fully taxable. Once all gain is withdrawn, future withdrawals are tax-free return of basis. On a qualified MYGA, all withdrawals are ordinary income.
Q: Can I have the carrier deposit straight into my checking?
A: Yes — ACH direct deposit is standard. Setup form takes 5 minutes; payments typically arrive on a fixed monthly date.
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Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed insurance producer appointed with multiple A-rated carriers
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Disclosure
This calculator is for educational and illustrative purposes only and is not a personalized recommendation, solicitation, or offer of any specific product. Outputs are approximations using publicly available rates, IRS tables, and standard payout factors as of 2026; actual carrier illustrations may differ. Annuity rates, caps, payout factors, surrender schedules, and tax brackets change frequently. Always confirm current values against the most recent carrier disclosure document, IRS Publication 590-B, and the actual contract before purchasing. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated carriers. Tax discussion reflects federal law as of 2026 and is subject to change. Consult a CPA and licensed advisor before acting on any output shown.