Almost every MYGA on the market credits compound interest — interest earned on interest, the way most people assume annuities work. A small number of carriers, including Knighthead Life, instead credit simple interest — a flat percentage of your original deposit, paid the same way every single year. As of today, Knighthead Life's Staysail 7 is offering 7.20% simple interest on a 7-year MYGA — which works out to roughly a 6.00% compound-equivalent rate. Neither number is "the real one." They're two different ways of describing very similar growth, and understanding the difference matters more than chasing the bigger-looking figure.
What Compound Interest MYGAs Do
In a standard compound-interest MYGA, your credited interest is added to your account value each year, and the following year's interest is calculated on that new, larger balance. Growth accelerates slightly every year, the same way a compound-interest CD or a compounding savings account works. This is how the large majority of MYGAs on the market are structured, and it's what most buyers picture when they hear "guaranteed rate."
What Simple Interest MYGAs Do Instead
A simple-interest MYGA calculates interest only on your original deposit, every year, for the full term — never on the growing balance. If you deposit $100,000 into a 7-year simple-interest MYGA at 7.20%, you earn exactly $7,200 every single year, for seven years, regardless of how large your account has grown. There's no acceleration, no compounding — just a flat, predictable, and easy-to-understand annual credit.
Why the Simple Interest Rate Looks Bigger
Because a simple-interest product never gets the benefit of compounding, carriers who offer them tend to advertise a noticeably higher headline rate to make the total payout competitive with a compound product over the same term. That's exactly what's happening with Knighthead Life's Staysail 7 right now: its 7.20% simple rate and a 6.00% compound rate deliver almost identical total growth over seven years. Neither is "better" on its face — they're two different math models converging on a similar outcome.
| Year | 7.20% Simple Interest | 6.00% Compound Interest |
|---|---|---|
| 1 | $107,200 | $106,000 |
| 2 | $114,400 | $112,360 |
| 3 | $121,600 | $119,102 |
| 4 | $128,800 | $126,248 |
| 5 | $136,000 | $133,823 |
| 6 | $143,200 | $141,852 |
| 7 | $150,400 | $150,363 |
$100,000 deposit, 7-year term. Illustrative math — actual results depend on the contract's exact terms.
Notice the pattern: the simple-interest product is actually ahead for most of the term, since it front-loads a flat, larger dollar credit every year. The compound product slowly closes the gap as its own growth accelerates, and by year seven the two are essentially even.
When Simple Interest Makes Sense
Simple-interest MYGAs tend to appeal to buyers who want a large, easy-to-explain annual number rather than a compounding curve — the crediting is easy to picture, and it doesn't require a compounding calculation to know what you'll earn each year. Some simple-interest products, including Staysail 7, are also positioned as RMD-friendly and carry no surrender charge at death, which can matter depending on how you're using the contract. As always, the right fit depends on your specific timeline, tax situation, and liquidity needs — not on which number sounds bigger.
The takeaway: Don't compare MYGA rates at face value across products that credit interest differently. A 7.20% simple rate and a 6.00% compound rate can land in nearly the same place. Always ask how a carrier credits interest before comparing it to another product's headline rate.
Questions about your specific situation? Contact Devin for a free, no-pressure rate comparison. Licensed in multiple states. No commitment required.