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Fixed Annuity vs. CDs: A Practical, Side‑by‑Side Comparison

Compare safety, rates, taxes, and liquidity—then see today’s MYGA rates and run your after‑tax numbers to decide confidently.

Principal Protection Tax‑Deferred Growth Transparent Terms
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How Each Product Works Rates & Return Potential Taxes & After‑Tax Growth Liquidity & Penalties Who Each Is Best For FAQs

How Each Product Works

What Is a Fixed Annuity (MYGA)?

A multi‑year guaranteed annuity (MYGA) is an insurance contract with a guaranteed interest rate for a set term—often 3, 5, 7, or 10 years. Interest compounds tax‑deferred; you don’t owe taxes on growth until you withdraw interest. Contracts often include 10% penalty‑free withdrawals, nursing‑home waivers, and optional income riders. Guarantees are backed by the issuing insurer’s claims‑paying ability and supported by state guaranty associations where applicable and subject to limits.

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Compare current offers on our fixed annuity rates page and review top fixed annuity companies.

Rates and Return Potential

- CDs: APYs vary by term and institution; online banks may publish specials. Short terms can be higher when the yield curve inverts.

- Fixed annuities (MYGAs): Often competitive—and sometimes higher—than comparable CDs at 3–10 year terms. Rates are guaranteed for the full term, and tax deferral can boost after‑tax accumulation over multi‑year horizons.

Compare: today’s MYGA rates
Run: CD vs. Annuity Calculator

Taxes and After‑Tax Growth

- CDs: Interest is taxed as ordinary income in the year it is credited or paid. Expect a 1099‑INT annually.

- Fixed annuities: Growth is tax‑deferred; taxes are due when you withdraw interest. This deferral can enhance compounding and after‑tax results, especially for higher tax brackets over multi‑year terms.

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Estimate after‑tax outcomes with the CD vs. Annuity Calculator.

Liquidity, Penalties, and Access

CD Liquidity

Early withdrawals typically incur bank penalties (e.g., 3–12 months of interest). No‑penalty CDs exist but often pay lower rates.

Fixed Annuity Liquidity

Surrender charges apply during the term, but many MYGAs allow up to 10% penalty‑free withdrawals annually. Some offer special waivers (e.g., nursing‑home). Rules vary by contract—review the disclosure details.

Who Is Each Best For?

Safety: FDIC/NCUA vs. Insurer + State Backstops
Rate: CDs Competitive vs. MYGAs Often Higher
Taxes: Annual vs. Tax‑Deferred
Liquidity: Penalties vs. 10% Free (typical)
Use Case: Short Term vs. Multi‑Year
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Near‑term goals? Consider a CD ladder. Multi‑year funds? Compare a MYGA. Start with today’s MYGA rates.
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Define Your Timeline

If you need access inside 12 months, lean CD or savings. For multi‑year funds, consider a MYGA term.

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Compare After‑Tax Yields

Check MYGA vs. CD rates for your target term and run the calculator.

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Confirm Safety & Fine Print

For CDs, confirm FDIC/NCUA coverage and penalties. For MYGAs, review insurer ratings, surrender schedule, free‑withdrawal rules, and disclosures.

Have questions? Talk to a licensed annuity professional.
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Fixed Annuity vs. CD: Frequently Asked Questions

QHow safe are CDs compared to fixed annuities?

CDs are insured by the FDIC or NCUA up to applicable limits per depositor, per institution, per ownership category. Fixed annuities are backed by the issuing insurer’s claims‑paying ability and supported by state guaranty associations, where applicable and subject to limits. Review carrier ratings and state coverage rules before purchasing. See our disclosures.

QDo MYGA rates pay more than comparable CD rates?

Often at 3–10 year terms, yes. Compare today’s MYGA rates with your bank’s CD specials to validate for your term.

QHow is interest taxed on CDs vs. fixed annuities?

CD interest is generally taxed each year as ordinary income. MYGA interest grows tax‑deferred, and taxes are due when you withdraw interest. For after‑tax comparisons, use our CD vs. Annuity Calculator.

QWhat happens if I need my money early?

CDs typically charge an early withdrawal penalty (e.g., 3–12 months of interest). Fixed annuities have surrender charges but usually allow up to 10% penalty‑free withdrawals annually; terms vary by contract. Compare features among top issuers: best fixed annuity companies.

QHow do I decide which is right for me?

Match the product to your timeline, tax bracket, and liquidity needs. For multi‑year funds you don’t need to touch, consider a MYGA’s rate and tax deferral. For near‑term needs or federally insured coverage, consider CDs. See MYGA rates, review how CDs work, and run the calculator.

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