$500k Annuity Showdown: MYGA vs FIA for Retirement Income

If you had $500,000 to invest for retirement income, which would you choose — a guaranteed 5.5% rate for 10 years, or a guaranteed paycheck for life?

In this lesson from the Retirement Income School™, we’ll walk through a real-world comparison between two popular annuity strategies — a Multi-Year Guaranteed Annuity (MYGA) and a Fixed Indexed Annuity (FIA) with an income rider. Both can protect your principal and provide predictable income, but the way they generate that income — and the long-term outcome — can look very different.

Understanding the MYGA

A Multi-Year Guaranteed Annuity (MYGA) is one of the simplest annuities available. It functions much like a bank CD but typically offers a higher rate and tax-deferred growth.

In this example, we’re looking at a 10-year MYGA offering 5.5% guaranteed interest. Your $500,000 principal is completely protected, and you can take annual interest withdrawals of $27,500 per year to supplement retirement income.

MYGAs are appealing because they’re straightforward:

• The rate is fixed and locked in for the term.

• There are no fees or surprises.

• You can take interest-only withdrawals each year, penalty-free.

At the end of 10 years, your full $500,000 principal is returned, giving you the option to renew, reinvest, or reposition your funds for new income goals.

This kind of annuity is ideal for retirees who want guaranteed yield, stability, and the freedom to keep their principal intact.

Understanding the FIA with an Income Rider

A Fixed Indexed Annuity (FIA) ties its growth to a market index such as the S&P 500, giving you a chance to earn market-linked returns without risking your principal. When you add an income rider, the annuity creates a guaranteed lifetime paycheck you can’t outlive.

For this comparison, our 65-year-old couple invests the same $500,000 into an FIA with a 1-year deferral. The top carrier quote produces a $39,097 annual income for life on a joint payout. If they deferred five years, that income would rise to $54,374 per year — showing the power of deferral.

This option provides:

• Principal protection with a 0% floor — meaning no market losses.

• Market-linked growth potential through an index like the S&P 500.

• Guaranteed lifetime income through the rider benefit.

• Optional long-term care enhancements that can increase income if care is needed.

The tradeoff is a small rider fee (typically around 1.25%) that funds the lifetime income guarantee.

Comparing the Outcomes

Both annuities protect your principal, but the income outcomes are different.

With the FIA, the couple receives guaranteed lifetime income of $39,097 per year as long as either spouse lives. Over 30 years, that adds up to roughly $1.1 million in total income — more than double their principal.

With the MYGA, the couple enjoys $27,500 per year of interest income for 10 years and receives their full $500,000 principal back at the end of the term. It’s predictable, flexible, and simple — but not lifetime-guaranteed.

The right choice depends on your priorities. If your goal is maximizing guaranteed lifetime income, the FIA wins. If you prefer short-term guaranteed yield and flexibility, the MYGA is the better fit.

The Real Takeaway

Both strategies can play an important role in a well-structured retirement income plan — the key is understanding what problem each one solves.

A MYGA is perfect for predictable, short-term income or safe growth with no fees. An FIA with an income rider is best for creating a “retirement paycheck” that continues for life.

It’s not about which one is better — it’s about which one fits your income timeline and goals. Many retirees use a combination of both, laddering annuities for flexibility, inflation hedging, and long-term security.

Creating Your Safe Income Plan

Annuities aren’t one-size-fits-all. The right mix depends on your age, assets, health, and income needs. But when used properly, they can form the foundation of a secure, stress-free retirement.

If you’ve ever worried about market losses or outliving your savings, understanding how MYGAs and FIAs work together could be the key to retiring financially relaxed.

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DISCLAIMER:
The information in this podcast is provided for general educational purposes only and does not constitute financial, legal, or tax advice. Retirement Income School™ and Dr. Amanda Barrientez do not provide individual investment recommendations. Always consult with a licensed advisor or tax professional before implementing any strategy discussed.