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 an A-rated insurance carrier 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.

Current MYGA yields (as of May 2026)

Term	A-rated MYGA yield	Bank CD yield (comparable)	10-yr Treasury
3-year	4.8–5.3%	4.4–4.7%	4.5%
5-year	5.0–5.5%	4.5–4.9%	4.5%
7-year	5.1–5.6%	N/A common	N/A
10-year	5.2–5.7%	N/A common	N/A

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

Why MYGAs beat bank CDs on yield

• Issued by A-rated insurance carriers (general-account assets) instead of FDIC banks. State guaranty associations back annuities (CLHIGA in California: 80% of present value, $250K cap per insured).
• 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 with multiple A-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 — full carve-out (or a portion the seller wants liquid) goes into a locked 5-10 year MYGA at the best A-rated yield 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. Here’s why:

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

Option	Year 1 tax	After-tax compounds in	10-yr total
A: All cash → MYGA at 5%	~$3,330,000	$6.67M after-tax	~$8.0M
B: $6M carve → MYGA 5% + $4M SIS @ 4%	~$2,000,000 (on $6M only)	$4M after-tax in MYGA + $4M pre-tax in SIS	~$9.28M

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

Bucket	Amount	Yield	Why
Emergency cash	$500K	3.5-4.0%	High-yield savings / money market — fully liquid, no surrender
Short MYGA	$1.5M	4.6-5.0%	3-year MYGA — modest yield bump, accessible in 3 years
Medium MYGA	$1.5M	5.0-5.4%	5-year MYGA — higher yield, locked for 5 years
Long MYGA	$500K	5.3-5.7%	10-year MYGA — max yield, locked entirely
Blended yield	$4,000,000	~4.5%	vs 5% locked-only or 3% all-liquid

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.