CD Type Annuity

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CD Type Annuity: A CD Alternative

What is a CD-type annuity? The fact is there really is no such thing as a CD-type annuity. When you hear someone use the term CD Type annuity they are referring to a Multi-year guarantee annuity (MYGA). MYGA’s are a type of fixed annuity and are often referred to as a CD type annuity because of the similarities they share.

A certificate of deposit (CD) is issued by a bank, whereas an annuity is issued by an insurance company. A CD-type annuity, or MYGA, is essentially a CD that is issued by an insurance company instead of a bank.

Bank CDs and “CD Type” annuities both credit interest in the same way.

Just like a bank certificate of deposit (CD), a CD type annuity credits a guaranteed rate for a set number of years. The interest rate and term of the contract period are contractually guaranteed by the insurance company issuing the policy.

Retirement isn't supposed to be hard - cd type annuity infographic

Today's Best CD Type Annuity (MYGA) Rates

The below table lists our best CD Type Annuity rates (MYGA) available, as of August 21, 2021.

CompanyAnnuityTermRateRatings
Atlantic Coast LifeSafe Harbor (Most States)10 Yrs3.20%B++
Security Sentinel LifePersonal Choice7 Yrs 3.10%B++
Atlantic Coast LifeSafe Haven (Most States)6 Yrs3.07%B++
Liberty Bankers LifeBankers Elite 9 (NO W/D)9 Yrs3.00%A
Guaranty Income Life Rate Lock 9 - $250K+9 Yrs3.00%B++
Atlantic Coast LifeSafe Harbor (Most States)5 Yrs3.00%B++
SILAC Insurance CoSecure Savings Elite 55 Yrs2.95%B+
Guaranty Income Life Rate Lock 9 9 Yrs2.90%B++
Liberty Bankers LifeBankers Elite 7 (NO W/D)7 Yrs2.90%A
Fidelity and Guaranty FG Guarantee Platinum 77 Yrs2.80%A-, S&P A-
SILAC Insurance CoSecure Savings Elite 55 Yrs2.80%B+
Guaranty Income Life Rate Lock 8 $250K8 Years2.75%B
Liberty Bankers LifeBankers Elite 5 (NO W/D)5 Years2.75%A-
SILAC Insurance CoSecure Savings Elite 55 Years2.70%B+
Guaranty Income Life Rate Lock 88 Years2.65%B++
Fidelity and Guaranty FG Guarantee Platinum 55 Years2.65%A-
SagicorMilestone MYGA 7 $100K+7 Years2.60%A
OceanviewOceanview Harbourview 4 Year 4 Years2.60%A-
SagicorMilestone MYGA 6 $100K6 Years2.50%A
SagicorMilestone MYGA 5 $100K+5 Years2.50%A-
American NationalPalladium MYG -7yr $250K+7 Years2.45%A , S&P A
American NationalPalladium MYG 6yr $250K+6 Years2.45%A , S&P A
American LifePlan Gap5 Years2.45%B++
SagicorMilestone MYGA $50K+7 Years2.40%A
SagicorMilestone MYGA 6 > $50K6 Years2.35%A
OceanviewOceanview Harbourview 3 Year MYGA3 Years2.35%A-
American NationalPalladium MYG -7yr $100K+7 Years2.30%A , S&P A
American NationalPalladium MYG 6yr $100K+6 Years2.30%A , S&P A
United of OmahaUltra-Premier 77 Years2.25%A+, S&P A+
Delaware LifePinnacle 77 Years2.25%A , S&P BBB
Reliance StandardEleos MVA5 Years2.25%A , S&P A
American LifeAmerican Classic 33 Years2.25%B
American National Palladium MYG 7yr < $100K7 Years2.20%A , S&P A
American NationalPalladium MYG 6yr < $100K6 Years2.20%A , S&P A
StandardFocused Growth 7 $100K+7 Years2.15%A, S&P A+
American NationalPalladium MYG -5yr $250K+5 Years2.15%A , S&P A
SILAC Insurance CoSecure Savings Elite 22 Years2.15%B+
Reliance StandardEleos-SP5 Years2.10%A++, S&P A+
SagicorMilestone MYGA 5 < $50K5 Years2.10%A
SagicorMilestone MYGA 4 >$100K4 Years2.10%A
Liberty Bankers LifeBankers Elite 3 (NO W/D)3 Years2.10%A
Standard Focused Growth 7 < $100K7 Years2.05%A, S&P A
StandardFocused Growth 5 $100K+5 Years2.05%A, S&P A
SagicorMilestone MYGA 3 - $100K+3 Years2.05%A-
United of OmahaUltra Premier 55 Years2.00%A , S&P A
Delaware LifePinnacle 55 Years2.00%A-, S&P BBB+
American Equity GuaranteeShield 55 Years2.00%A , S&P A
American NationalPalladium MYG 3yr 250K+3 Years2.00%A, S&P A
StandardFocused Growth 5 <$100K5 Years1.95%A, S&P A+
Fidelity and Guaranty FG Guarantee Platinum 33 Years1.95%A-, S&P A-
SagicorMilestone MYGA 6 <$50K6 Years1.90%A-
American NationalPalladium MYG 5yr $100K+5 Years1.90%A , S&P A
American NationalPalladium MYG 3yr $100K+3 Years1.85%A, S&P A
SILAC Insurance CoSecure Savings Elite 22 Years1.85%B+
American NationalPalladium MYG 3yr < $100K3 Years1.75%A, S&P A-
SILAC Insurance CoSecure Savings Elite 22 Years1.75%B+
American GeneralPathway Vision MYG 4 $100K4 Years1.70%A, S&P A
SagicorMilestone MYGA 5 - <$50K5 Years1.65%A-
OceanviewOceanview Harbourview 2 2 Years1.65%A-
SagicorMilestone MYGA 4 $50K+ 4 Years1.60%A-
SagicorMilestone MYGA 3 $50K+3 Years1.50%A
StandardFocused Growth 3 - $100K+3 Years1.50%A, S&P A+
Delaware LifePinnacle 33 Years1.45%A-, S&P BBB+
American Equity GuaranteeShield 33 Years1.45%A , S&P A
StandardFocused Growth 3 < $100K3 Years1.40%A, S&P A
SagicorMilestone MYGA 4 < $50K4 Years1.10%A
SagicorMilestone MYGA 3 - <$50K3 Years1.10%A-

Best CD Rates

Rates are as of  February 27th, 2021, and retrieved from Bankrate.com.

Financial InstitutionAPY 5 yearMinimum Deposit
Delta Community Credit Union1.25%$1,000
SchoolsFirst Federal Credit Union1.01%$20,000
VyStar Credit Union1.00%$500
First Internet Bank of Indiana0.96%$1,000
Suncoast Credit Union0.95%$500
Golden 1 Credit Union0.90%$500
Navy Federal Credit Union0.90%$1,000
Comenity Direct0.90%$1,500
Ally Bank0.85%$0
Randolph-Brooks Federal Credit Union0.85%$1,000

Are CDs Safer than a Fixed Annuity?

Bank CDs are considered an extremely safe investment because the FDIC insures them up to $250,000.

Although annuities are not insured by the federal government, they’re also considered safe because they’re insured by the issuing insurance company and, in most cases, also by state guaranty associations.

A fixed-rate annuity’s guarantees are backed by the issuing insurance company’s ability to meet its policyholder obligations – so it is important to consider the life insurance company’s financial rating when buying an annuity. 

 

CDs vs Fixed Annuity

The below table compares and contrasts some of the key similarities and differences between a CD and a multi-year guarantee annuity. The main difference is an annuity’s interest grows tax-deferred while the interest you earn in a CD is taxable in the year it is earned, regardless of whether or not you spend it.

 FIXED ANNUITYCD (CERTIFICATE OF DEPOSIT)
Issued ByInsurance CompaniesBanks
Investment Amount$2,000 - $1,000,000Essentially Any Amount
Investment Term3 years - 10 years3 months - 5 years
Interest Rates (APY)Rates by product but usually higher.Varies by financial institution, term and investment amount.
LiquidityUsually, 10% annually or interest earned.Almost always accumulated interest.
GuaranteesThe claims-paying ability to issue Insurer and by State Guaranty Funds.Backed by the FDIC up to $250,000 per depositor, per institution.
Death BenefitPassed directly to the beneficiary without probate process.Probate process required.

How Are Annuities Taxed?

Interest you are paid on a certificate of deposts (CD) is taxed in the year in which it is received wheras interest earned from an annuity grows tax-deferred until you withdraw your funds.

You pay taxes on interest earned in a CD whether you spend it or not.

Try this annuity vs CD calculator to see the difference in the interest you will earn in a taxable vs tax-deferred savings account. 

 Taxable
(CDs)
 Tax-Deferred
(Annuity)
    
Dollar Amount$100,000 $100,000
Interest Rate5%5%
Interest Earned$5,000 $5,000
Tax Bracket32%32%
Taxes Payable$1,600 $0
After Tax Earnings$3,400 $5,000
Net After Tax Yield3.40%5%
YEAR 2
Interest Earned $5,000$5,250
Taxes Payable$1,600 $0
After Tax Earnings$3,400 $5,250
Net After Tax Yield3.40%5.25%

Access to Your Money

Annuities are not as flexible as CDs, and they have higher penalties for early withdrawals greater than the contract’s free withdrawal amount.

Fixed Annuities

Annuity annual free withdrawal amounts vary by company but are usually either 10% of the annuity’s account value or interest earned. A withdrawal during the initial contract period is subject to a declining surrender charge schedule. 

For instance, a 5 year fixed annuity may have a surrender charge of 8%, 7%, 6%, 5%, 4%, 0% surrender charge schedule. Meaning a withdrawal above the free amount would be charged an 8% penalty in year one, a 7% in year two, 6% in three, etc.

In addition to the penalties imposed under the annuity contract, annuity owners under the age of 59½ must pay the IRS a penalty of 10 percent for early withdrawal from an annuity.

CD’s

If you close a CD earlier than scheduled, the penalty you pay is typically the interest you have earned. So you always get back at least your original deposit.

And whereas penalties for early withdrawals from a CD typically increase each time the CD is renewed, penalties for early withdrawals from an annuity are fixed.

 

What Happens to the Money in an Annuity When You Die?

Annuities allow a surviving spouse access to the annuity funds without penalty. However, penalties apply to CDs in the event of the death of a spouse.

Annuity beneficiaries are not required to go through probate court in the event of the annuity owner’s death to claim their benefits.

If certificates of deposit are not placed in a living or irrevocable trust, heirs must go through probate if the CD owner dies

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