When to Move From HYSA to MYGA: The Four Trigger Signals
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.
Why this decision matters more than people think
A HYSA pays a floating rate that resets monthly with Fed Funds. A MYGA locks a fixed rate for 3-10 years. In a stable-rate environment the choice is mostly about liquidity. In a cutting cycle, the choice can mean $30,000+ of lost interest over a 5-year window on a $250,000 balance.
Through 2022-2024 the HYSA crowd benefited as rates climbed. The Fed then cut 1.75 points between September 2024 and December 2025. It has not cut in 2026: it held at 3.50-3.75% through July and raised its target range to 3.75-4.00% on September 16, 2026 (FOMC statement). So as of September 28, 2026, Trigger 1 below has not fired. Triggers 2-4 do not depend on a Fed call.
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Trigger 1: The Fed has signaled cuts
Two things to watch:
- The dot plot. Released after every other FOMC meeting. If the median dot for the next 12 months sits 75+ bps below current Fed Funds, the cycle has turned. Lock now.
- The 2-year Treasury yield. The 2-year is the bond market's best forecast of where Fed Funds will be in 18 months. When the 2-year drops 50+ bps below current Fed Funds, the bond market is pricing cuts. That is an estimate, not a promise. On September 25, 2026 the 2-year yielded 4.81% (U.S. Treasury), above the 3.75-4.00% Fed funds target, so it was not signaling cuts.
If both signals fire and the cuts follow, HYSA yields could fall 100-200 bps over 12-18 months, as they did in past cutting cycles. A 5-year MYGA locked before that would keep its rate through the drop.
Trigger 2: The yield spread exceeds 75 bps
MYGA rates are quoted higher than HYSA rates as a function of (a) duration premium, (b) credit risk (state guaranty vs FDIC), and (c) the carrier's bond portfolio yield. The spread varies. Spreads in June 2026 are below. On September 24, 2026, top HYSAs paid 3.00-4.00% (bank sites) and A-rated 5-year MYGAs about 5.80-6.00% (AnnuityRateWatch), a 5-year spread of roughly 180-300 bps:
| Term | Best HYSA | Best MYGA (A-rated) | Spread |
|---|---|---|---|
| 1 year | 4.50% | 5.15% | +65 bps |
| 3 year | 4.50% | 5.55% | +105 bps |
| 5 year | 4.50% | 5.85% | +135 bps |
| 7 year | 4.50% | 5.95% | +145 bps |
| 10 year | 4.50% | 6.05% | +155 bps |
Decision rule: If the MYGA-HYSA spread at your target term is greater than 75 bps, the locked yield premium pays for the liquidity sacrifice. At 135 bps (the June 2026 5-year spread), the math is decisive.
Trigger 3: Your time horizon is 3+ years
MYGAs carry surrender penalties for the first 3-10 years (declining schedule, usually 9% in year 1 down to 0% at term end). If you might need the money inside 3 years, the surrender risk swamps the yield benefit.
Rule of thumb:
- 0-12 month horizon: HYSA only.
- 1-2 year horizon: HYSA + short CDs.
- 3-5 year horizon: MYGA becomes optimal.
- 5-10 year horizon: MYGA dominates.
- 10+ year horizon: MYGA OR fixed-indexed annuity, depending on growth tolerance.
Trigger 4: The amount is $50K+
MYGA contracts have minimum premiums (usually $10K-$25K) and real application overhead: replacement forms, suitability reviews, beneficiary designations, and 1035-exchange paperwork if rolling from an existing annuity. Below $50K the per-dollar overhead does not pay off.
Above $50K the math gets compelling. Above $250K it is a no-brainer because the FDIC limit forces you to split a HYSA across multiple banks anyway, and a single MYGA covered by a state guaranty fund is administratively simpler than three HYSAs at three banks.
Worked example: $250K if the Fed cuts (hypothetical)
Hypothetical, using June 2026 rates: a 5-year MYGA at 5.85%, a HYSA at 4.50%, and a Fed that cuts 150 bps over 24 months. No such cuts had happened as of September 28, 2026. HYSA path:
| Year | Assumed HYSA Rate | Interest Earned on $250K |
|---|---|---|
| 1 | 4.10% (avg as cuts begin) | $10,250 |
| 2 | 3.25% | $8,125 |
| 3 | 2.75% | $6,875 |
| 4 | 2.50% | $6,250 |
| 5 | 2.50% | $6,250 |
| 5-yr total (HYSA, taxed annually) | $37,750 |
MYGA path at 5.85% locked, compounding (tax-deferred):
| Year | Balance End of Year | Interest That Year |
|---|---|---|
| 1 | $264,625 | $14,625 |
| 2 | $280,106 | $15,481 |
| 3 | $296,492 | $16,386 |
| 4 | $313,837 | $17,345 |
| 5 | $332,196 | $18,359 |
| 5-yr total interest | $82,196 |
Difference: $44,446 more interest from the MYGA over 5 years. Plus the interest grew tax-deferred (no annual 1099), so the actual after-tax advantage is even larger if you are in the 24%+ bracket.
When NOT to move from HYSA to MYGA
- You might buy a house, change careers, or face a major medical expense in the next 36 months.
- The MYGA carrier is rated below A- by AM Best. The state guaranty fund is real but slower than FDIC. Do not take credit risk for an extra 25 bps.
- You are under 59 1/2 and do not have a Roth IRA setup. Early withdrawal from a non-qualified annuity triggers a 10% IRS penalty on the gain, on top of ordinary income tax.
- You have no other liquid assets. The MYGA is illiquid by design. Keep at least 6 months of expenses in the HYSA first.
Related reading
- CD ladder vs MYGA ladder
- Where to park cash for 5 years
- HYSA + CD ladder combo
- Browse current MYGA carrier reviews
Frequently Asked Questions
Can I move my whole HYSA into a MYGA?
Technically yes, but you should not. Keep 3-6 months of expenses in the HYSA. Move only the surplus into the MYGA. The combo strategy beats either extreme.
What if I lock a MYGA and rates climb later?
You are stuck at the locked rate. The trade-off for certainty. The right answer is to ladder MYGAs across maturities (a MYGA ladder) so you have something rolling into the new rate environment every 1-2 years.
Are MYGA yields really 100+ bps above CDs?
At 3+ year terms in 2026, yes. The structural gap exists because insurance carriers invest in slightly higher-yielding bond portfolios than bank CDs, and the regulatory capital treatment differs. Verify current spreads. They widen and narrow with the bond market.
Is the MYGA interest taxable each year like CD interest?
No. MYGA interest is tax-deferred until withdrawal. CD interest over 1-year term is taxed annually under the OID rules even if you do not receive it. The deferral alone is worth ~30-50 bps of equivalent yield in the 24% bracket.
What is the early-surrender penalty on a typical 5-year MYGA?
Declining schedule, typically 9-9-8-7-6-0% over 5 years. Plus market value adjustment (MVA) which can add or subtract depending on rate moves. After year 5 there is no penalty. Most MYGAs also allow 10% annual penalty-free withdrawals during the surrender period.
Does the state guaranty fund really protect MYGAs like FDIC protects HYSAs?
Yes, but mechanics differ. Coverage is typically $250,000-$300,000 per owner per carrier (varies by state). FDIC is faster (90-day claim resolution) and federal. Guaranty funds are state-by-state and slower (6-18 months). For amounts above $250K, split across multiple A-rated carriers to stay inside coverage.
Should I use a fixed-indexed annuity instead of a MYGA?
Different tool. FIAs offer market-linked upside with a 0% floor and longer surrender schedules (7-15 years). MYGAs offer pure rate certainty. If you want the rate locked, choose MYGA. If you want growth tied to equities with downside protection, FIA. They are complementary, not interchangeable.
Want a second opinion on your cash strategy?
Talk to a licensed independent advisor. Hans.
HYSA yields move with Fed Funds. MYGA lock windows close fast when the cycle turns. The difference between a good and a great cash strategy on $250K+ over 5 years is usually $20,000-$50,000 in real interest. Worth a 15-minute conversation.
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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 article reflects publicly available rates, products, and tax law as of 2026-06-27. HYSA yields, CD rates, MYGA rates, and FDIC/state guaranty fund limits change frequently. Always confirm current values against the most recent provider disclosures and tax law before acting. 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 and long-term care insurance market. No compensation has been received from any bank, credit union, or insurance carrier in connection with the publication of this article. Always read the actual contract or account disclosure and consult a licensed advisor or tax professional before making material cash-management decisions. Past rate environments do not predict future rates.