FIAs credit interest based on an external index (like the S&P 500) but never drop below 0% (the floor). Returns are calculated via:

• Cap Rate: The maximum return. If the market does 15% and the Cap is 6%, you get 6%.
• Participation Rate: The % of the gain you keep. If the market does 10% and the Par Rate is 80%, you get 8%.‍
• Spread: A fee deducted from the gain. If the market does 10% and the Spread is 2%, you get 8%.

MYGA rates are typically higher than Certificate of Deposit (CD) rates because insurance companies invest in a broader mix of corporate bonds and real estate, whereas banks are more restricted. Additionally, MYGAs offer tax deferral (you don't pay taxes on interest until withdrawal), allowing for "triple compounding" (interest on principal, interest on interest, interest on tax savings), which boosts the effective yield compared to a taxable CD.

With the Federal Reserve expected to cut rates in 2026 to a neutral range of 3.00%–3.25%, annuity yields (which correlate with bond yields) are projected to fall. Consumers looking for safe income are advised to "lock in" current high rates with 5, 7, or 10-year MYGAs before these cuts materialize, effectively securing today's yield for the next decade.

To compare an annuity's tax-deferred rate to a taxable investment, you must calculate the Tax-Equivalent Yield. For an investor in the 32% tax bracket, a 5.00% tax-deferred annuity yield is roughly equivalent to a 7.35% taxable yield (e.g., from a CD or bond fund). This metric highlights the efficiency of annuities for high-income earners in 2026.

Generally, no. The investment risk in a Variable Annuity is borne by the owner. If the underlying sub-accounts (mutual funds) lose value, the account balance drops. However, many VAs offer optional "riders" (for an additional fee) that can guarantee a minimum future income base or a death benefit return of principal, regardless of market performance.

An MVA is a feature that applies if you withdraw more than the free amount during the surrender period. If interest rates have risen since you bought the annuity, the insurer may reduce your withdrawal amount (to offset the loss on the bonds they must sell). If rates have fallen, they may actually increase your withdrawal amount. It shifts some interest rate risk from the insurer to the consumer.