Market Value Adjustment (MVA)

A Market Value Adjustment (MVA) is a feature in some fixed and fixed indexed annuities that changes the value of your contract if you withdraw money before the end of your surrender period. The adjustment can reduce your payout if market interest rates move against your original contract rate — or in some cases increase it if rates move in your favor.

If you take money out early, an MVA can significantly affect how much you receive, so it’s important to understand when it applies, how it works and how to avoid unexpected reductions.

How Does an MVA Work?

The MVA compares interest rates today to the interest rate environment when you bought your annuity.

Here’s the general idea:

If current rates are higher than when you bought the annuity, your withdrawal may receive a positive MVA, possibly increasing your payout.

If current rates are lower than when you bought the annuity, your withdrawal may receive a negative MVA, reducing your payout.

Insurance companies each use proprietary formulas, but the principle is the same: MVAs reflect how much it costs the insurer to unwind or replace investments due to your early withdrawal.

When Does an MVA Apply?

MVAs only apply under specific conditions, usually during the surrender period.

Common triggers include:

• Taking more than the penalty-free withdrawal amount
• Fully surrendering your contract early
• Moving the money to another financial product before your surrender period ends
• Taking withdrawals not related to qualifying exceptions (like certain nursing home waivers)

If you stay within your penalty-free withdrawal limit — often 10% per year — the MVA typically does not apply.

When a Positive MVA Is Triggered

Imagine your annuity allows 10% penalty-free withdrawals each year, but you decide to take out 25% to help pay for a home renovation project. The first 10% comes out penalty-free, while the extra 15% counts as an early withdrawal during the surrender period.

In this scenario, interest rates have gone up since you purchased the annuity. Because of that, the insurer applies a positive Market Value Adjustment to the excess withdrawal. This slightly increases the amount you receive and can help offset any surrender charges you may owe.

Here, your early withdrawal works out more favorably because market conditions moved in your direction.

When a Negative MVA Is Triggered

Now imagine the same withdrawal situation — you take more than the 10% penalty-free amount while still in the surrender period.

However, in this case, interest rates have gone down since you bought the annuity. As a result, the insurer applies a negative Market Value Adjustment to the excess amount. This reduces the money you receive, and you may also owe a surrender charge.

In this scenario, your payout is lower because the extra amount above the penalty-free limit triggered a negative MVA.

MVA vs. Surrender Charges

An MVA is separate from a surrender charge. Both can apply at the same time.

MVA: A market-based adjustment that may raise or lower your payout.

Surrender Charge: A percentage fee for early withdrawal.

The combination can meaningfully impact what you receive, especially in declining interest rate environments.

MVA Example: $250,000 Fixed Annuity

Let’s say you have a $250,000 annuity. You can withdraw up to $25,000 each year without penalty.

In year 3, you withdraw $50,000, which means:

• The first $25,000 is free
• The remaining $25,000 gets an 8% surrender charge and an MVA because interest rates went up 2%

The MVA formula, which is unique to insurance providers, shows a –5.71% adjustment, which reduces your payout.

Surrender charge: $2,000
MVA reduction: $1,427.50

You receive: $46,572.50 (Total reduction: $3,427.50)

Why Do Insurance Companies Use MVAs?

MVAs help insurers manage interest rate risk, which allows them to offer:

• More stable crediting rates
• Higher guaranteed rates
• Better long-term investment performance for contract holders

By sharing interest-rate risk with consumers who withdraw early, insurers can reward long-term annuity holders with improved earnings.

Pros and Cons of Market Value Adjustments

An MVA isn’t automatically good or bad; it simply reacts to changes in interest rates. In some situations, it can boost your payout, while in others it can reduce it. Here’s how to weigh the upsides and downsides.

How To Avoid a Negative MVA

You can often avoid a negative MVA by being careful about when and how you take money out of your annuity. The easiest way is to wait until the surrender period is over, when MVAs usually no longer apply. You can also stay within your contract’s penalty-free withdrawal amount, since taking more than that is what typically triggers an MVA.

Some annuities offer special waivers for situations like nursing home care or terminal illness, which let you access funds early without an adjustment. If you’re not sure how your contract handles MVAs, it’s smart to call your insurer or agent before withdrawing. A quick conversation can confirm whether an MVA will apply and help you avoid an unexpected reduction.

Bottom Line: Should MVAs Affect Your Annuity Choice?

MVAs aren’t something to fear — they simply help insurers manage interest rate risk and often allow for better long-term rates. They can be a good fit if you expect to keep your money invested for the full term and understand how early withdrawals may change your payout. But if you might need access to your funds sooner, an annuity without an MVA may be a better choice.

Market Value Adjustment Frequently Asked Questions