HYSA vs MYGA Comparison (2026), When Each Wins, With $250K Math
Quick take: HYSAs and MYGAs solve different problems. HYSA: fully liquid, variable rate (~4.25%), FDIC-insured, taxed annually. MYGA: locked 3-10 years, fixed rate (~5.40-5.75%), state-guaranty protected, tax-deferred. The MYGA typically wins by 15-25% over 5 years at high brackets, but only for money you won't touch.
Rates expire like milk.
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Savings account vs MYGA, after tax
What $100,000 earns in 5 years: savings account vs MYGA, after tax
Rates used: Savings account 4.00%, the top online savings rate we tracked (bank sites, September 24, 2026); savings rates can change any day; 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).
| Savings account, interest taxed every year | $116,604 |
|---|---|
| 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 savings account, after tax | $9,531 |
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.
The core trade-off
| Feature | HYSA | MYGA |
|---|---|---|
| What it is | Bank deposit account | Insurance contract (annuity) |
| Rate type | Variable: changes anytime | Fixed: locked for full term |
| Rate (2026) (as of June 2026) | 4.10-4.55% APY | 5.40-5.75% (3-10 yr) |
| Term | None: withdraw anytime | 3, 5, 7, or 10 years |
| Liquidity | Full, anytime | 10% free / year + surrender charges |
| Protection | FDIC: $250K per bank per depositor | State guaranty: typically $100-$300K per carrier |
| Tax treatment | Ordinary income, taxed annually | Tax-deferred; ordinary income at withdrawal |
| Issuer | FDIC-insured bank | A-rated insurance carrier |
| Pre-59 1/2 penalty | None | 10% IRS penalty on gain (not principal) |
| Best for | Emergency fund + 1-12 month cash | 3+ year money you've committed |
The math at $250,000 over 5 years
This is the comparison most large-balance savers should run before deciding where to park 5-year money. Assumes 32% federal + 9.3% California bracket (combined 41.3% marginal on ordinary income).
Scenario A: Top HYSA at 4.30% (held flat, generous)
$250,000 x 4.30% = $10,750 interest/yr. After tax at 41.3% = $6,310 net/yr. Compounded over 5 years (after-tax interest reinvested):
| Year | Beginning | Interest (gross) | Tax | Ending |
|---|---|---|---|---|
| 1 | $250,000 | $10,750 | $4,440 | $256,310 |
| 2 | $256,310 | $11,021 | $4,552 | $262,779 |
| 3 | $262,779 | $11,300 | $4,667 | $269,412 |
| 4 | $269,412 | $11,585 | $4,785 | $276,212 |
| 5 | $276,212 | $11,877 | $4,905 | $283,184 |
5-year HYSA ending value: ~$283,184 (net gain $33,184)
Scenario B: Top 5-yr MYGA at 5.65% (locked, tax-deferred)
$250,000 x (1.0565)^5 = $329,090 at maturity. All compounding happens on gross interest (no annual tax drag).
| Year | Beginning | Interest (gross) | Tax | Ending |
|---|---|---|---|---|
| 1 | $250,000 | $14,125 | $0 (deferred) | $264,125 |
| 2 | $264,125 | $14,923 | $0 | $279,048 |
| 3 | $279,048 | $15,766 | $0 | $294,814 |
| 4 | $294,814 | $16,657 | $0 | $311,471 |
| 5 | $311,471 | $17,600 | $0 | $329,071 |
5-year MYGA ending value at maturity: ~$329,071 (gross gain $79,071)
Tax at withdrawal: The $79,071 gain is taxable as ordinary income when withdrawn. At a 41.3% bracket, that's $32,656 of tax, leaving net of $46,415 vs HYSA's $33,184.
Net comparison after withdrawal-tax
| Vehicle | Gross gain over 5 yr | Net gain after all tax |
|---|---|---|
| HYSA @ 4.30% | $57,300 (taxed annually) | $33,184 |
| 5-yr MYGA @ 5.65% | $79,071 (taxed at withdrawal) | $46,415 |
| MYGA net advantage | +$21,771 gross | +$13,231 net (+39.9%) |
And if you don't lump-sum withdraw, the deferral compounds further
If at MYGA maturity you roll into another MYGA (Section 1035 exchange: tax-free for non-qualified, IRA-to-IRA for qualified), the entire $329,071 keeps compounding tax-deferred. The HYSA equivalent has been paying tax every year and lost ~$24,000 of compounding to taxes during the first 5 years.
If you partial-withdraw the gain in retirement when you're in a lower bracket (e.g., 22% instead of 41.3%), the tax bill drops further. Many MYGA buyers structure withdrawals during the gap years between retirement and Social Security, when their tax bracket is naturally lower.
Why the gap exists (mechanically)
Two structural reasons MYGA rates beat HYSA rates:
- Asset-liability matching. A 5-year MYGA tells the insurance carrier "you have $250K for 5 years guaranteed." The carrier invests in 5-year corporate bonds, mortgages, or private credit, assets that yield 100-200 bps above what a bank can earn on its overnight Fed reserves. The carrier passes most of that yield to you and keeps a spread for their capital + reserves.
- Tax deferral. The IRS treats annuity-contract interest as deferred under IRC Section 72. Banks don't have that designation; their deposit interest is taxable annually. This deferral isn't a benefit the carrier creates. It's a tax-code feature of insurance contracts.
When HYSA wins
- Money you might need in the next 3 years. MYGA surrender charges (7-9% year 1, declining) wipe out the rate advantage if you break early.
- Emergency fund. By definition, this is money you can't predict. Leave it in HYSA.
- Working capital for a business. Cash you might deploy for a deal, hire, or expense. HYSA's full liquidity is essential.
- Sub-$25K balances. MYGA minimums are typically $10K-$25K; some go higher. HYSAs accept anything.
- Pre-59 1/2 access without IRS penalty. MYGAs add a 10% IRS penalty on the gain portion for non-qualified pre-59 1/2 withdrawals. HYSAs don't.
When MYGA wins
- Money you've already decided is "long money." Inheritance, sale of a business, retirement nest egg you're not drawing from for 5+ years.
- High tax bracket savers. The annual HYSA tax drag compounds against you; MYGA deferral compounds for you.
- Pre-retirement (age 50-65) money you want to grow before Social Security. MYGA defers tax into your lower-bracket retirement years.
- Fed-cut cycle expected. Locking 5.65% for 5 years insulates you from variable HYSA rates dropping to 2-3% in the next easing cycle.
- You'd be tempted to spend HYSA cash. The surrender schedule is a behavioral feature. It's harder to touch on impulse.
The "split" strategy most savers should consider
For a $250K saver:
- $30-$50K in HYSA (emergency fund, 6-12 months expenses) at top no-minimum HYSA like Marcus or Synchrony
- $200-$220K in 5-yr MYGA at 5.65% locked, tax-deferred, A-rated carrier
Result: full emergency access on the slice you might need, +18-20% net advantage on the slice you've committed.
Related research
- Best HYSA Rates 2026
- Best HYSA for Large Balances, the breakpoint where MYGAs decisively win
- HYSA vs CD
- CD vs MYGA, the bank-CD analog of this comparison
- The 5-Year MYGA
My take
HYSAs are the right home for emergency funds and short-term cash. MYGAs are the right home for committed 3+ year money. For most savers with $50K+ in liquid cash above their emergency fund, the math favors moving the long-money slice to a MYGA: 100-140 bps higher rate, contractually locked, tax-deferred. At $250K and 5 years, that's $13,000+ in net advantage. At $1M, it's $50,000+. Run your specific bracket.
About Hans Goldstein: Independent retirement income specialist. CA Life License #4273294. NPN #20602398. Reviews 30+ annuity carriers and the leading bank HYSAs. Hans does not earn commission on HYSAs or CDs. These reviews are written for the same risk-averse savers who often end up as MYGA buyers when they need 3+ year money. Phone: 213-414-2808. Email: hans@hansgoldstein.com.
Frequently asked questions
Run the MYGA vs HYSA math for your situation
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HYSAs are the right home for 1-12 months of cash. For 3+ year money, a MYGA typically pays 50-120 bps more and defers tax, a combo that quietly adds 15-25% to your effective yield in a high bracket. Worth 15 minutes to run your real numbers.
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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 review is based on the carrier's public product materials and rates as of the date shown above. HYSA APYs are variable and change frequently. Confirm current values directly with the bank before opening an account. FDIC insurance covers up to $250,000 per depositor, per insured bank, per ownership category. MYGA rates referenced are illustrative top-of-market quotes as of 2026 and depend on state, carrier appointment, and product approval; not all MYGAs are available in every state. This is general education, not a personal recommendation or an offer of any product. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated carriers across the annuity market; Hans is not a banking representative and does not earn compensation on HYSA or CD products. Tax discussion reflects federal law as of 2026 and is subject to change. State tax treatment varies. Always read the actual bank disclosure and consult a licensed advisor or CPA before reallocating retirement-bound funds.