Market value adjustments, explained
What fixed-annuity buyers should know when a disclosure mentions an MVA — separate from surrender charges, and unique to your contract.
The short version
- A market value adjustment (MVA) is an extra credit or charge a fixed annuity applies when you take money out early — tied to how interest rates have moved since you bought.
- It is not the surrender charge. An early withdrawal can pass through both, in that order.
- If rates rose since you bought, the MVA usually reduces your payout; if rates fell, a two-way MVA can pay you a positive adjustment.
- The MVA is almost always waived once you're past the surrender window — and on penalty-free withdrawals and death benefits.
A market value adjustment is an extra credit or charge some fixed annuities apply when you take money out early — tied to how interest rates have moved since you bought your contract. It is not the same thing as the surrender-charge schedule, though both can hit the same withdrawal.
If you've seen "MVA" or "interest adjustment" in a brochure and weren't sure whether it helps you or costs you, that's the right question — the answer depends entirely on which way rates moved. This guide walks through why insurers use the adjustment, how the math layers on top of the surrender charge, two worked examples, when the MVA simply doesn't apply, and the three things to look for in your own disclosure.
Why insurers use MVAs
When an insurer sells you a fixed rate locked in for several years, it has to invest your money to make good on that promise. If you walk away early — especially when rates have moved a lot since you signed up — what your contract is actually worth to the insurer that day may be higher or lower than the account value on your statement. The MVA closes that gap on the insurer's end, using a formula written into the contract.
The mechanism cuts both ways, and that's the part most people miss. When rates have risen, the insurer can reinvest at a higher yield, so an early exit costs it less — and the MVA typically reduces your payout. When rates have fallen, the opposite is true, and a two-way MVA can pay you a positive adjustment on the way out.
The quick rule
If your fixed annuity is past its surrender window, the MVA is almost always waived too. If you're inside the surrender window and rates have moved meaningfully since you bought, expect an MVA on top of the surrender percentage — the direction depends on which way rates went.
How the math layers
People treat the MVA and the surrender charge as the same number. They're not. An early withdrawal goes through both, in this order: the account value is reduced by the surrender charge, and then the MVA is applied. Here's how that stacks on a $100,000 fixed annuity locked at 4.5%, surrendered at the end of year three, with rates up about two points since purchase.
How an early exit layersIllustrative — $100,000 at 4.5%, surrendered end of year 3, rates +2 pts. Both deductions apply to the same exit.
Past maturity, both deductions disappear
The surrender charge and the MVA both apply only while you're inside the rate-guarantee period. Once the term ends, both bars vanish — you can take your full account value with neither one.
A concrete example
Same fixed annuity, same withdrawal point, two different rate scenarios. The surrender charge stays the same either way — but the MVA can swing from a deduction to a credit depending on where rates went.
Scenario 1 — rates rose 2 points. The insurer can reinvest at a higher yield, so the MVA works against you:
Illustrative only. The real MVA in your contract is calculated from a specific rate index — usually a Treasury yield or swap rate — not from a rule of thumb.
Scenario 2 — rates fell 2 points. Same surrender charge, but a two-way MVA now pays you a positive adjustment:
When rates fall, some MVA formulas pay you a positive adjustment on an early exit — but only if your contract's formula works both ways and your withdrawal qualifies.
The part the brochures skip: a two-way MVA is an option you're paid to hold
Read the two scenarios together and the MVA stops looking like a penalty and starts looking like what it actually is — a mark-to-market. Your contract's early-exit value moves the way a bond's price does: down when rates rise, up when rates fall. A non-MVA annuity holds that value flat at book; a two-way MVA hands you the bond-like upside if rates drop.
That matters because of why people lock a multi-year rate in the first place. If your reason for buying is a view that rates are headed lower, you are buying into precisely the scenario where the MVA pays you. And carriers typically credit a higher base rate on a two-way MVA contract than on an otherwise-identical non-MVA one — you absorb some of the interest-rate risk, and they pay you for it in the headline rate.
The reframe
For a buyer who expects rates to fall, a two-way MVA is not the catch — it's an embedded option you're being paid (in a higher rate) to hold. The honest caveat: you'd usually want to keep an above-market locked rate rather than surrender it, so the real worth is liquidity and optionality — the contract is worth more than its account value if you ever need to exit — not a reason to plan one.
When MVAs don't apply
The MVA is built for early withdrawals. Four common situations fall outside it:
You're past the surrender-charge window. Once the rate-guarantee period has ended, the contract almost always waives the MVA along with the surrender charge.
You're taking the penalty-free amount. Many fixed annuities allow up to 10% per year penalty-free, and the MVA usually doesn't apply to that portion. The disclosure spells it out.
Death benefit. Death benefits are typically paid at account value, with no MVA reduction.
Your contract simply doesn't have one. Not every fixed annuity carries an MVA. Some carriers skip it entirely.
Reading your disclosure
To verify how the MVA works on your specific contract, look for three things in the brochure or sample contract:
The MVA section
Find the "Market value adjustment" heading (sometimes "Interest adjustment"). This confirms whether one applies at all and how it's triggered.
Example tables
Tables showing your account value next to what you'd actually receive on an early exit — for rates that rose and rates that fell. These are the clearest way to see the formula in action.
The rate index
The index the formula tracks — usually a Treasury yield or swap rate. The MVA size depends on changes in that specific index since you bought, not on the general direction of the market.
Whether it's two-way
Some MVAs only ever charge you; others credit you when rates fall. Confirm whether the adjustment can move in your favor, not just against you.
Frequently asked questions
Is the MVA the same as a surrender charge?
No. The surrender charge is a fixed schedule that steps down to zero over the term. The MVA is a separate adjustment tied to interest-rate movement since you bought. An early withdrawal can pass through both — see how withdrawals and surrender work.
Can the MVA ever pay me money?
Yes, if your contract's formula works both ways. When rates have fallen since you bought, a two-way MVA credits you a positive adjustment on an early exit. Confirm in the disclosure that the adjustment can move in your favor.
How do I avoid the MVA entirely?
Hold the contract to the end of its term. Once you're past the surrender window, the MVA is almost always waived along with the surrender charge — and so is the penalty-free withdrawal amount along the way. Sizing the term to money you won't need is the cleanest way to never see one.
Comparing an offer with an MVA?
Get a free, no-pitch Second Opinion — we’ll check the offer you’re weighing against the live market and send you a plain written take on the MVA, surrender terms, and rate. You decide what to do with it.
Get a free Second Opinion →