How Much Will a CD Earn?
A $10,000 CD at 4.5% compounded annually for 5 years grows to about $12,462, earning roughly $2,462 in interest before taxes. Your real return is lower once you account for taxes and inflation, because CD interest is taxed every year it is credited and rising prices chip away at the purchasing power of your balance. Use the calculator below to see your own numbers and adjust for your tax bracket and an inflation estimate.
How to Use the CD Calculator
- Enter your initial deposit. Type the amount you plan to put into the certificate of deposit, such as $10,000 or $50,000.
- Enter the interest rate and term. Add the CD’s annual interest rate and how long your money will stay locked in, then choose how often interest compounds.
- Adjust for taxes and inflation. Add your marginal tax rate and an expected inflation rate to see your after-tax balance and the inflation-adjusted value of your CD over time.
What a CD Calculator Shows You
A certificate of deposit is a fixed-rate savings product offered by a bank or credit union. You agree to leave your money untouched for a set term, and in return the bank pays a guaranteed interest rate. Pull the money out early and you usually pay a withdrawal penalty.
This calculator does three things. First, it projects your account balance year by year using your deposit, rate, term, and compounding frequency. Second, it subtracts taxes, since CD interest is taxable each year unless the CD sits inside an IRA or other tax-advantaged account. Third, it discounts your future balance by an inflation rate so you can see your real return, not just the headline number. If inflation runs higher than your interest rate, the inflation-adjusted balance falls over time even though the dollar balance keeps climbing.
The result is a clearer picture than a simple “rate times years” estimate. A CD advertised at 4.5% does not put 4.5% in your pocket. After a 22% federal tax bracket and 3% inflation, the same CD might deliver a real, after-tax return closer to 0.5% to 1%.
CD Interest Is Taxed Every Year
The tax treatment is where a CD and an annuity part ways. With a CD, the interest you earn is reported and taxed each year, even if you do not touch the money until maturity. That yearly tax drag slows compounding because you are paying the IRS along the way instead of letting the full balance grow.
A multi-year guaranteed annuity, or MYGA, works differently. Interest grows tax-deferred, so you owe nothing until you withdraw. The same dollar earning the same rate compounds faster inside a MYGA than inside a taxable CD because it is not losing a slice to taxes every year. For a side-by-side comparison, run the numbers in our CD vs annuity calculator or our fixed annuity calculator. To see how compounding alone affects growth, try the compound interest calculator.
CDs are insured by the Federal Deposit Insurance Corporation up to $250,000 per depositor, per bank, which is part of why conservative savers like them. You can read the coverage rules at the FDIC deposit insurance page.
Maria, 61, has $50,000 in a savings account and wants a safe place to grow it for five years before she retires. Her bank offers a 5-year CD at 4.5%. She enters $50,000, a 4.5% rate, a 5-year term, and her 22% marginal tax bracket into the calculator. The CD grows to about $62,309 before taxes, earning roughly $12,309 in interest, but after her 22% tax on that interest she keeps closer to $9,600.
She then compares that to a 5-year MYGA quoted at a similar rate. Because the MYGA defers tax until she withdraws, more of her interest stays invested and compounds along the way. Adding a 3% inflation estimate, Maria sees that her real, after-tax gain on the CD is modest, and she decides the tax-deferred MYGA is the better fit for money she will not need until retirement.
CD vs Annuity at a Glance
| Feature | Bank CD | MYGA (Fixed Annuity) |
|---|---|---|
| Interest taxed | Every year | Deferred until withdrawal |
| Guarantee backing | FDIC, up to $250,000 | Insurance carrier and state guaranty association |
| Typical term | 3 months to 5 years | 2 to 10 years |
| Early withdrawal | Penalty on interest | Surrender charge, often with a free-withdrawal allowance |
| Best for | Short-term, fully liquid-at-maturity savings | Tax-deferred growth for money earmarked for retirement |
As of 2026, top MYGA rates run roughly 5.0% to 6.3% depending on term and carrier, often edging out comparable bank CDs while adding tax deferral. You can compare current offers from 90+ top annuity companies on our fixed annuity rates page, or browse the full annuity calculators hub for more tools.
Frequently Asked Questions
How is CD interest taxed?
CD interest is taxed as ordinary income in the year it is credited to your account, even if you do not withdraw it until the CD matures. Your bank reports it on a Form 1099-INT. The only exception is a CD held inside a tax-advantaged account such as an IRA, where the interest grows tax-deferred until you take distributions.
What is the difference between APY and the interest rate?
The interest rate is the base rate the bank pays. The annual percentage yield, or APY, reflects that rate plus the effect of compounding over a year. Because more frequent compounding produces more interest, a CD that compounds daily has a slightly higher APY than the same stated rate compounding annually. APY is the more accurate number for comparing one CD to another.
Are CDs protected against inflation?
No. A CD pays a fixed rate, so if inflation rises above that rate your money loses purchasing power even as the dollar balance grows. The inflation-adjusted column in this calculator shows that effect. CDs protect your principal from loss, but they do not guarantee a positive real return after inflation.
Is a CD or a MYGA better?
It depends on your timeline and tax situation. A CD is simple, FDIC-insured, and fully available at maturity, which suits short-term savings. A MYGA usually offers competitive or higher rates plus tax-deferred growth, which can mean more money kept over time for funds earmarked for retirement. For money you will not need for several years, the tax deferral often tips the balance toward a MYGA.
What happens when a CD matures?
At maturity you typically have a short grace period to decide what to do. You can withdraw the principal and interest, roll it into a new CD, or move it elsewhere. If you take no action, many banks automatically renew the CD at the current rate, which may be lower than what you had. Mark your maturity date so you can shop your options instead of being rolled into a renewal by default.
