MYGA: The Tool for the Cash Carve-Out Side

What a MYGA is in one sentence

A Multi-Year Guaranteed Annuity (MYGA) is a fixed-rate annuity contract from a highly rated insurance company (A or better by A.M. Best or equivalent) that locks in a guaranteed interest rate for a set term (typically 3, 5, 7, or 10 years), with the interest tax-deferred during accumulation. Think of it as a CD-equivalent that’s issued by an insurance carrier instead of a bank, pays a higher locked rate, and lets the interest compound tax-deferred until withdrawal.

MYGA yields: May 2026 snapshot (current 5-year range 5.80% to 6.00%, A-rated insurers, as of Sept 24, 2026)

Current rates indicative; Hans gets fresh quotes weekly from the MYGA carriers he is appointed with. Available rates vary by carrier credit rating, term length, and deal size.

Why MYGAs beat bank CDs on yield

• Issued by highly rated insurance companies (general-account assets) instead of FDIC banks. Not FDIC insured: a MYGA is backed only by the claims-paying ability of the issuing insurance company, so the insurer's rating matters.
• Tax-deferred accumulation. Interest doesn’t hit your 1099 each year. It compounds untaxed inside the MYGA until withdrawal. With a CD, interest is taxed annually as ordinary income, even if reinvested.
• Locked rate for the entire term. If rates fall over the next 5 years, you keep your locked rate. CDs roll at maturity at whatever the new rate is.
• No bank deposit cap. $1M into a MYGA from one carrier is fine. FDIC caps protection at $250K per bank per ownership category, so large sums require splitting across banks.

How Hans uses MYGAs alongside SIS placements

For California sellers who take a cash carve-out at closing, the carve-out money doesn’t have to sit in a checking account earning nothing. Hans is appointed directly with multiple highly rated MYGA carriers and places the carve-out the same week as closing:

1. Sale closes with the SIS rider. Carve-out cash + remainder split per the rider.
2. Carve-out cash hits seller’s account within days of closing.
3. Within 30 days, Hans places the MYGA: the full carve-out (or whatever portion the seller doesn’t need liquid) goes into a locked 5-10 year MYGA at the best yield from a highly rated insurer Hans can source that week.
4. Seller earns ~5% locked, tax-deferred for the full MYGA term. Annual interest compounds untaxed.
5. At MYGA maturity, seller can take cash, roll to a new MYGA, or annuitize for guaranteed income.

The honest math: does MYGA-on-all-cash beat SIS-with-MYGA-carve-out?

This is the most common question for sellers in the $5M-$10M range:

“Would taking ALL the cash and putting it in a 5% MYGA do better than tranching some into SIS at 4-4.5%?”

Short answer: no. Tranching wins, even though SIS yields less. The math:

Example: $10M sale ($1M basis, $9M gain, 10-year horizon)

Tranched advantage: ~$1.28M (~16% more). The SIS portion wins on principal-base size, not yield. The SIS compounds the FULL $4M pre-tax. The MYGA can only compound the $2.5M leftover after $1.5M of tax. Bigger principal × lower yield > smaller principal × higher yield over 10 years.

The advantage scales further with:

• Longer term (20-30 year SIS): more years of pre-tax compounding
• Smaller carve-out (more $$ into SIS): bigger principal base for the structural advantage
• Higher gain percentage (low basis): more tax saved by spreading recognition

The bucket strategy: when you want some liquidity AND some locked yield

Most sellers who take a cash carve-out don’t want to lock it all in a long MYGA. Surrender charges in years 1-7 make MYGAs effectively illiquid for the first half of the term. The right move for a seller who values some liquidity is the bucket strategy: split the carve-out across different yield/liquidity profiles.

Example: $4M carve-out, age 65, wants some accessibility

The honest tradeoff

The default 5% MYGA yield assumed in the calculator is the BEST case for the cash side: locked, 5+ years, no liquidity. If the seller actually needs the carve-out for immediate use, the realistic yield drops to 3-4%, which makes the SIS path comparatively even better.

• If you need full liquidity on the carve-out → real yield ~3% → SIS tranche advantage grows by 15-25%
• If you can lock most of it in MYGAs → blended ~4.5% → SIS advantage is what the calc shows
• If you don’t actually need the cash at all → why take the carve-out? Put more into SIS, get bigger advantage

The calculator now lets you adjust the carve-out yield assumption (3%, 4%, 4.5%, 5%, 6%) so the math reflects YOUR actual plan for the cash.

When MYGA-only (no SIS) makes sense

• Small gain: sale price under $500K. SIS setup overhead doesn’t pencil.
• Short horizon: seller plans to spend the principal in 3-5 years. SIS’s long-term advantage doesn’t apply.
• No tax-spread benefit needed: seller already in low brackets, or §121 primary-residence exclusion + low basis means little gain to spread.
• Maximum liquidity required: MYGA has surrender charges (usually 7-10% in year 1 declining to 0% by year 7) but unlike SIS, you CAN access the money if needed.