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What Is a Market Value Adjustment Annuity? Easy Guide

In the landscape of retirement planning, annuities stand as a cornerstone for those looking to secure a stable income post-retirement. Among the various types available, the Market Value Adjustment (MVA) Annuity presents itself as a notable option. 

This article aims to demystify what is a market value adjustment annuity, how it operates, and the myriad factors one must consider before opting into this financial vehicle.

Unpacking Annuities

An annuity is an agreement with an insurance company. You pay them a sum, either as a lump sum or through installments, and in return, they provide you with periodic payments. 

Annuities come in several flavors—each with its own set of rules and benefits. Before diving into the specifics of MVA annuities, it’s crucial to grasp the essence of annuities themselves.

What Is a Market Value Adjustment Annuity? Detailed Guide

What is a Market Value Adjustment Annuity?

A Market Value Adjustment Annuity is a subtype of fixed annuity. It differs from other annuities through its adjustment feature. This feature comes into play when the annuity holder makes withdrawals beyond the free withdrawal allowance or surrenders the policy before the term ends. 

The MVA can increase or decrease the surrender value of the annuity depending on the interest rate changes since the annuity purchase.

How an MVA Annuity Works

MVA annuities begin in the accumulation phase, where the money you’ve invested earns interest. The insurer sets the interest rate for a predetermined period. 

If you decide to withdraw funds or surrender the annuity during this term, the market value adjustment applies. This adjustment reflects the change in the market interest rate relative to the rate at the time of your annuity’s purchase. While this can work in your favor, offering higher returns, it also carries the risk of reducing your annuity’s value.

Potential Benefits

The appeal of MVA annuities lies in their potential for higher yields compared to other fixed annuities, especially if interest rates rise after you’ve purchased your annuity

They offer a blend of security, through fixed interest rates, and the opportunity to benefit from favorable market conditions.

Risks and Disadvantages

However, they are not without risks. A significant drop in interest rates could lead to a negative MVA, reducing your annuity’s value

Their complexity also means you’ll need a good grasp of how they operate to make the most of them. Additionally, surrender charges can further eat into your returns.

Investing in MVA Annuities

Choosing an MVA annuity requires a careful balance of your financial goals, liquidity needs, and your comfort with its complexities. 

It’s important to fully understand the terms, the potential for adjustments, and how they align with your retirement strategy.

Comparison with Other Annuities

When weighing your options, consider how MVA annuities stack up against other types. Each has its pros and cons, tailored to different investor profiles. 

MVA annuities might suit those seeking potentially higher returns and willing to navigate their complexity.

Pro Tips

Incorporating MVA annuities into a diversified retirement plan can mitigate some inherent risks. 

Understanding the nuances of your annuity’s adjustment features and consulting with a financial advisor can also provide clearer guidance tailored to your situation.

MVA Annuities and Withdrawals

The specifics of how withdrawals affect your MVA annuity are crucial. Early withdrawals can lead to unfavorable adjustments, impacting the overall effectiveness of your retirement planning

Understanding the terms of your agreement is essential.

MVA Annuity

Ideal Candidates for MVA Annuity

MVA annuities best serve individuals looking for a balance between security and potential for higher gains based on market conditions. Those averse to risk or not fully understanding of the product’s mechanisms might seek alternatives more aligned with their comfort level.

Frequently Asked Questions

What happens to my MVA annuity if interest rates drop or increase?

An increase in interest rates since purchasing your annuity could lead to a positive MVA, enhancing your annuity’s value upon withdrawal. Conversely, a decrease can result in a negative MVA.

Can I lose money in an MVA annuity?

Yes, through negative MVAs and surrender charges, your annuity’s value can decrease below the initial investment in some scenarios.

How is the market value adjustment calculated?

The calculation considers the change in interest rates since you purchased the annuity, factoring in the current rate environment and the duration until the annuity’s term ends.

Do MVA annuities offer death benefits?

Like many annuity products, MVA annuities often come with a death benefit provision, but specifics can vary by contract and provider.

Are MVA annuities protected by state guaranty associations?

Yes, annuities are generally covered by state guaranty associations, offering a level of protection for your investment. However, coverage limits vary by state.


The MVA annuity represents a bridge between the desire for stable, guaranteed retirement income and the pursuit of higher returns through market involvement. 

Its complexity and market-dependent features make it a nuanced choice, suitable for some investors more than others. 

By carefully considering your financial goals, understanding the workings of the MVA, and possibly consulting a financial advisor, you can make a more informed decision about whether this annuity type aligns with your retirement planning objectives.