You have $250,000 sitting in a savings account or an old CD, and you want it to actually earn something for the next few years without putting it at risk in the stock market. Two products fit that description: a multi-year guaranteed annuity (MYGA) from an insurance company, and a certificate of deposit (CD) from a bank.
Most people compare them by walking into their local bank and asking what the CD rate is. The bank gives them a number. They take it. They never look at the alternative.
Here’s the alternative. In most cases — but not all — a MYGA pays more, defers taxes, and offers similar (sometimes better) safety. In a few specific cases, a CD wins. This guide walks the comparison honestly and tells you when each one makes sense.
The 60-second answer
| | MYGA (5-year) | 5-year CD | |—|—|—| | Current top rate | 5.18%–5.63% guaranteed (live) | 4.00% – 4.70% APY (representative; varies weekly) | | Issuer | Insurance company | Bank or credit union | | Tax on annual interest | Tax-deferred (no 1099 each year) | Taxed every year as ordinary income | | Insurance / guarantee | State guaranty association (limits vary) | FDIC up to $250k per bank per ownership category | | Early-withdrawal penalty | Surrender charge schedule, declining over term | 3-12 months of interest, depending on bank | | Free annual withdrawal | Typically 10% per year, no charge | None on most CDs | | Minimum investment | Often $25k+ | Often $500–$1k | | Auto-renewal | No (most don’t auto-renew) | Yes (many do, sometimes at lower rate) |
If you’re putting $50k or more into a 5-year-or-longer position and you don’t need full liquidity, the MYGA usually wins on after-tax math by a meaningful margin. If you have a smaller balance, need flexibility, or want FDIC specifically, the CD can be the right call.
The rest of this article shows the work.
Yield: MYGA usually wins, sometimes by a lot
Insurance companies invest your annuity premium in long-dated bonds, mortgages, and (for the carrier’s general account) some private credit. They’re investing for 30+ year liabilities and can afford to lock up your money. Banks, by contrast, hold your CD against shorter-dated assets and have to manage liquidity for depositors. The structural difference means insurance companies can typically pay 50–150 basis points more on equivalent-duration money.
As of today, the spread is real:
- Top 5-year MYGAs: 5.18%–5.63% guaranteed (live across carriers we represent)
- Top 5-year CDs at brokerages: roughly 4.30%–4.70% APY (representative; current snapshot)
- Top 5-year CDs at retail banks: roughly 3.50%–4.20% APY (representative; current snapshot)
On $250,000 over five years, that yield gap is typically worth $7,000–$24,000 in nominal interest before taxes, depending on where in the spread you sit.
Taxes: the gap widens on after-tax dollars
This is the part most CD-comparison articles skip.
CD interest is taxed as ordinary income every year — your bank sends you a 1099-INT in January for the prior year’s interest. You owe federal tax on it (and state tax in most states) whether you withdrew the interest or left it in the CD.
MYGA interest is tax-deferred until you withdraw it. The interest compounds inside the annuity contract, untaxed, for the entire term. You only owe taxes when you take money out — and many MYGA holders roll the proceeds into a new MYGA at maturity, deferring taxes further.
For a high-bracket investor, this is decisive.
Worked example: $250,000, 5-year hold
Scenario: $250,000 deposited, 5-year hold, top-of-market rates, 32% combined federal + state marginal tax bracket.
| | MYGA at 5.30% | CD at 4.50% | |—|—:|—:| | Year-1 interest credited | $13,250 | $11,250 | | Tax owed in year 1 | $0 (deferred) | $3,600 (paid annually) | | Net interest year 1 (after tax) | $13,250 stays in account | $7,650 retained, $3,600 paid out | | Balance after year 5 (pre-tax) | $323,776 | $305,538 | | Tax owed when fully withdrawn | $23,608 (32% on $73,776 gain) | $0 (already paid annually) | | Net after-tax proceeds | $300,168 | $305,538 |
Wait — the CD wins on this math? At a 32% bracket where you withdraw all the MYGA money in one year, yes, marginally. But notice what happens if you spread the MYGA withdrawal over multiple years (typical retirement strategy) or if the bracket on withdrawal is lower than the bracket during the accrual period (typical for retirees):
| Scenario | MYGA after-tax proceeds | CD after-tax proceeds | MYGA advantage | |—|—:|—:|—:| | 32% bracket entire time, lump withdrawal | $300,168 | $305,538 | -$5,370 | | 32% accrual / 22% retirement bracket | $307,545 | $305,538 | +$2,007 | | 32% accrual / 12% retirement bracket | $314,923 | $305,538 | +$9,385 | | 32% accrual / 22% bracket, withdrawn over 5 years (laddered) | $311,234 | $305,538 | +$5,696 |
For retirees who’ll be in a lower tax bracket once they stop working — which is most retirees — the MYGA’s tax deferral is worth more than the headline rate gap suggests. The deferred-tax-compounding effect is real, but the bracket arbitrage on retirement is bigger.
For high-bracket savers in their peak earning years who plan to fully withdraw at the same bracket, the math is closer to neutral and the CD’s simpler tax treatment can be preferable.
Safety: FDIC vs state guaranty association
Both products are very safe. They’re not the same kind of safe.
CDs are FDIC-insured up to $250,000 per depositor, per insured bank, per ownership category. If your bank fails, the FDIC pays you within days. This is the gold standard of consumer-deposit insurance — nobody has lost FDIC-insured money in a US bank failure in living memory.
MYGAs are guaranteed by the issuing insurance company, backstopped by your state’s insurance guaranty association. If the carrier fails, the state guaranty association steps in to make policyholders whole, up to limits that vary by state — typically $250,000 of present value per contract, sometimes higher. The state guaranty association is not FDIC. The protections are similar in practice but legally distinct.
The practical safety question for most buyers is simpler: is the carrier solidly rated?
A-rated and better life insurance companies almost never fail. The last big failure (Executive Life of California, 1991) was 35 years ago and policyholders were ultimately made whole through guaranty associations and successor companies. The 2008 crisis hit a few annuity carriers but not catastrophically; AIG’s life subsidiaries kept paying claims throughout.
Practical advice: stick to A-rated or better carriers (AM Best A-, A, A+, A++). Spread very large balances across multiple carriers if you’re putting more than your state guaranty association limit into any single contract. If you do both, the MYGA risk is lower than the headline FDIC framing suggests, even though it’s not literally FDIC.
Liquidity: this is where CDs often win
CDs typically have a flat early-withdrawal penalty — usually 3 to 12 months of interest if you cash out before maturity. That’s it. You can pull the entire balance, take the penalty, and walk.
MYGAs have a surrender charge schedule that decreases each year, plus a 10% annual free withdrawal. A 7-year MYGA might charge 7% in year 1 (declining 1 percentage point per year) on any withdrawal beyond the 10% free amount.
Compare for a $250,000 5-year position, withdrawing the full balance in year 2:
- 5-year CD with 6-month interest penalty: lose ~$5,625 (6 months of 4.5% interest)
- 5-year MYGA with 6%-then-5%-then-4% surrender schedule: withdraw 10% free ($25,000), pay 5% surrender on the remaining $225,000 = $11,250 charge
The CD is cheaper to break early. For money you might genuinely need, the CD’s simpler exit is worth the lower yield.
But: if you’re confident the money is committed for the term, the surrender schedule is irrelevant — you don’t pay it. And the 10% annual free withdrawal on a MYGA gives you a regular liquidity option that most CDs don’t.
Auto-renewal: a CD trap
Most banks auto-renew CDs at maturity unless you proactively contact them. The auto-renewal rate is often significantly lower than the new-money rate the bank is offering on its website. A 5-year CD that paid 4.5% on origination might auto-renew at 3.0% if you don’t act in the 7-10 day grace period.
MYGAs don’t auto-renew. At maturity, the balance moves to a 30-day window during which you can withdraw it, transfer it via 1035 exchange to a new MYGA at the current best rate (often a different carrier), or annuitize it. If you do nothing, most carriers move the balance to a low-yield holding account waiting for instructions.
The annual review burden is similar — you have to pay attention to your CD or your MYGA at maturity. But the CD’s silent auto-renewal at a lower rate has cost more retirees money than any other “trap” in the comparison.
When the CD wins
CDs are the right choice when:
- Your balance is under $25k, where many MYGAs aren’t available and the higher CD-account-management overhead isn’t worth optimizing.
- You might need the principal during the term and don’t want to deal with a surrender schedule.
- You’re maxing out FDIC as a deliberate safety strategy across multiple banks (as opposed to relying on state guaranty associations).
- You want the simplicity of one bank, one statement, one easily-cancellable product.
- You’re already in a low tax bracket and won’t get materially lower in retirement, so the tax deferral is worth less to you.
When the MYGA wins
MYGAs are the right choice when:
- You have $50k+ of principal you can commit for 3+ years.
- You’re in a high tax bracket now and expect to be in a lower one in retirement (the arbitrage opportunity).
- You want a higher guaranteed rate on the conservative portion of your portfolio.
- You’re rolling over a 401(k) or IRA — the MYGA can sit inside the qualified wrapper, no taxable event on rollover, and you keep the deferral.
- You want the option of converting to lifetime income at maturity — most MYGAs allow you to annuitize the balance at then-current rates without surrender charges.
Both? Use a ladder
Many retirees end up using both, structured as a ladder:
- $50k into a 1-year CD (immediate liquidity buffer)
- $75k into a 3-year MYGA (mid-term, takes the rate gap)
- $125k into a 7-year MYGA (longer-term, takes the bigger rate gap and longer deferral)
The ladder gives you something maturing each year, smooths reinvestment risk, and captures the MYGA’s higher long-end rates without locking up everything.
A licensed agent can build a personalized ladder in about 20 minutes once you share the numbers. They don’t earn extra commission for adding the CD recommendation — but the right professional puts together the ladder that fits your life, not the one that maximizes their commission.
What about Treasuries?
Treasury bills, notes, and TIPS are the third option many people consider. Quick comparison:
- 5-year Treasury yield (2026): 4.2%–4.5% — lower than top MYGAs.
- Tax treatment: federal tax on interest, but exempt from state and local tax. Better than CDs in high-state-tax states (CA, NY, OR), worse than MYGA’s full deferral.
- Liquidity: sellable on the secondary market any time, but at whatever the market price is — could be below par if rates have risen.
- Safety: US Treasury credit, the gold standard. Better than any insurance company or bank.
For a buy-and-hold investor, Treasuries usually pay less than MYGAs but more than retail CDs, with the cleanest liquidity story. Worth considering as a third leg of the ladder, especially in high-state-tax states.
How to actually shop
The MYGA market is fragmented across 30+ carriers, and rates change weekly. The bank rate you saw isn’t the best rate unless your bank happens to be on top of the leaderboard that week (rare).
A licensed LAD Financial agent runs the comparison across the carriers we represent in 30 seconds, factoring in your state (some products aren’t available everywhere), surrender preference, and tax situation. You’ll get the actual best rate, not a generic article rate.
Talk to a licensed LAD agent — tell us your state and roughly how much you’re considering, and we’ll send you a written comparison within one business day. No obligation, no pressure, no catch.
Or see this week’s top MYGA rates live.
Rates shown are illustrative as of 2026 and change weekly. State availability varies. Tax outcomes depend on individual circumstances; consult a tax advisor. FDIC and state guaranty association coverage limits apply. Information is educational and not a recommendation. Verify current terms with a licensed agent before making any decision.