Market Value Adjustment (MVA) on Annuities Explained

Quick Answer: What Is a Market Value Adjustment?

A market value adjustment (MVA) is a formula that increases or decreases your annuity’s surrender value when you cash out early – if interest rates have risen since you bought, you get less; if rates have fallen, you get more.

Last updated: March 2026 | Reviewed by: Elizabeth Prescott, AnnuityJournal Editorial Team

Most people buying a MYGA (multi-year guaranteed annuity) understand surrender charges. The MVA is less talked about but can matter just as much if you need to exit a contract early. Here is exactly how it works – and how to know if your annuity has one before you sign.

How a Market Value Adjustment Works

Insurance companies invest your premium in bonds and other fixed-income instruments to fund their rate guarantees. When interest rates rise after you buy, those bonds are worth less in the secondary market. If you surrender early, the insurer has to sell assets at a loss to pay you out – the MVA passes some of that loss to you.

Conversely, when interest rates fall after you buy, the bonds the insurer holds are now worth more. If you surrender, the MVA works in your favor and you receive a higher payout than your account value.

The MVA adjustment is calculated based on a comparison between:

• The interest rate index at the time you purchased
• The same interest rate index at the time you surrender

Each carrier uses its own formula, but most reference a published index like the 5-year Treasury rate or a specific corporate bond index. The bigger the rate swing, the bigger the adjustment – positive or negative.

MVA Formula: A Simplified Example

Suppose you buy a 5-year MYGA when 5-year Treasury rates are 4.50%. Two years in, you want to surrender. Rates have risen to 5.50%. You have $110,000 in account value.

Most MVA formulas produce a negative adjustment in this scenario – perhaps -2% to -4% depending on the carrier’s formula and remaining term. Your net surrender value might be $105,000-$107,500 before surrender charges, instead of the full $110,000.

Now reverse it: you bought when rates were 5.50% and surrendered when rates fell to 4.00%. The MVA could add 3%-5% to your payout, giving you $113,000-$115,500. The MVA can actually benefit you in a falling rate environment.

MVA vs. Surrender Charges: What’s the Difference?

Both can apply at the same time. If you surrender a MYGA early in a rising rate environment, you may face both a surrender charge AND a negative MVA adjustment – compounding the reduction to your payout. Always check the illustration to see both applied simultaneously.

Which Annuities Have MVAs?

Not all annuities have MVAs. Here is a general breakdown:

• MYGAs: Many carry an MVA, particularly those with longer terms (5-10 years). Some MYGA products – especially 2-3 year terms – are marketed as “MVA-free.”
• Fixed annuities (traditional): Many carry an MVA.
• Fixed indexed annuities (FIAs): Some have MVAs, some do not. Check the contract.
• SPIAs: No MVA – once annuitized, there is no account value to adjust.
• Variable annuities: MVAs are rare because the account value fluctuates with markets.

Before purchasing any fixed annuity, ask the agent directly: “Does this product have a market value adjustment? Can you show me the MVA formula and an illustration of how it would affect my surrender value if rates rise 1%?” A reputable agent will walk you through this without hesitation.

Can You Avoid the MVA?

Several situations typically exempt you from the MVA even during the surrender period:

• Free withdrawal provision: Most annuities allow 10% of account value per year without surrender charges or MVA
• Death benefit: MVAs typically do not apply when the contract pays to a beneficiary upon the owner’s death
• Annuitization: Converting to income payments at or after the surrender period avoids the MVA
• MVA-free riders: Some carriers offer rider add-ons that eliminate or cap the MVA
• Rate trigger provisions: Some contracts waive the MVA if interest rates haven’t moved by more than a certain amount

After the surrender period ends, the MVA disappears entirely. Once you’re in the free window – typically 30-90 days after each contract anniversary – you can surrender without any adjustment.

The Upside Nobody Talks About

In a falling rate environment, the MVA is your friend. Buyers who purchased MYGAs in 2022 when rates were at 4%-5% and surrendered in 2024 after rates fell slightly would have seen a positive MVA adjustment. It is not just a penalty mechanism – it is a two-way adjustment tied to the market.

This is why comparing annuities on surrender charges alone is not sufficient. In a rising rate environment, an “MVA-free” product at a slightly lower rate might actually be worth more on early exit than a higher-rate product with an aggressive MVA formula.

How to Read MVA Language in Your Contract

Your annuity contract will contain an “MVA provision” or “market value adjustment endorsement.” Look for:

• The reference index (e.g., “Moody’s Corporate Bond Yield Average” or “5-Year Treasury CMT Rate”)
• The base rate (the index rate at the time of purchase)
• The current rate (the index rate at surrender)
• The formula used (typically involves the difference between base and current rate multiplied by a factor based on remaining term)

If you cannot locate this information in your contract or product disclosure, the carrier’s customer service team can walk you through a sample calculation.

For current MYGA rates and which products include MVA provisions, see our Best MYGA Rates page where we note MVA status where available. And review our full breakdown of how surrender charges work to understand how both charges interact on early exit.