Current-rate comparison
Annuity vs CD
CDs are simple bank deposits. Fixed annuities are insurance contracts. The rate gap matters, but the real decision is whether tax deferral and a higher contract rate are worth giving up some liquidity and FDIC-style backing.
Side-by-side comparison
Where the tradeoffs show up
Rate rows use current figures where they exist; the rest explains the contract and account rules.
| Dimension | Annuity | CD | What this means | Edge |
|---|---|---|---|---|
Rate or yield Rate + rules | 6.65% guaranteed rate from Atlantic Coast Life | 4.2% APY from TAB Bank; national average 1.35% | The annuity rate is 245 bp above the top 5-year CD and 530 bp above the FDIC national average. The annuity side adds tax deferral; the CD side adds federal deposit insurance within limits. | Annuity |
Tax treatment Contract/account rules | Interest grows tax-deferred until withdrawal. | Interest is generally taxable each year unless held in a tax-advantaged account. | Tax deferral can matter more in a taxable account than inside an IRA. | Annuity |
Liquidity Contract/account rules | Access is governed by surrender charges, free-withdrawal rules, and waivers. | Early withdrawal penalties usually apply, but CD terms are simpler and shorter options are common. | CDs are usually easier to size around near-term cash needs. | CD |
Principal safety Contract/account rules | Backed by the insurer claims-paying ability and state guaranty association limits. | FDIC or NCUA insurance applies within federal limits at covered institutions. | Both can protect principal, but the backing source is different. | CD |
Fees Contract/account rules | Fixed annuities often have no explicit annual fee, but surrender charges can apply. | Most CDs have no annual fee; the main cost is the early-withdrawal penalty. | Neither should be judged by fees alone; exit cost is the key. | Tie |
Guarantees Contract/account rules | Rate and principal guarantees are contract terms from the insurer. | APY is fixed for the CD term and backed by deposit insurance within limits. | Both are contractual; compare the guarantor and the term. | Depends |
Current data read
What the numbers actually say
Today the top 5-year MYGA rate we see is 6.65%. The top 5-year CD benchmark is 4.2%, and the FDIC national 60-month CD rate is 1.35%. That puts the MYGA 245 bp above the top CD and 530 bp above the national average, with tax deferral on the annuity side and federal deposit insurance on the CD side.
CFA framework
Start with three questions: yield, access, and who stands behind the promise.
Nikhil Anilkumar Bhauwala, CFA, compares cash alternatives by matching the term first, then checking the tradeoff. A higher fixed annuity rate can be valuable, but only if the surrender period and insurer backing fit the job this money needs to do.
Nikhil Anilkumar Bhauwala, CFA- Compare like terms first; a 5-year MYGA belongs next to a 5-year CD or Treasury, not a checking account.
- Then compare the backstop: deposit insurance, a U.S. government obligation, or the insurer claims-paying ability.
- Do not chase a few extra basis points with money that may need to stay flexible.
Plain-English definitions
MYGA
A multi-year guaranteed annuity with a fixed rate for a stated contract term.
CD
A bank or credit-union time deposit with a stated APY and early-withdrawal penalty.
Annuity vs CD: FAQ
Is an annuity or a CD safer?
A CD has FDIC or NCUA insurance within federal limits. A fixed annuity is backed by the insurer that issues it, so carrier strength matters. On this page, the current annuity rate is 6.65%; the top 5-year CD benchmark is 4.2%.
Is an annuity or a CD better for taxes?
In a taxable account, a fixed annuity can defer tax on credited interest until money comes out. CD interest is generally taxable each year. Inside an IRA or another tax-advantaged account, that difference may matter less.
Which is better for liquidity?
A CD is usually easier to plan around because the early-withdrawal penalty is straightforward. An annuity may allow free withdrawals or waivers, but the surrender schedule has to be read carefully.
Turn this into a personal comparison
Compare current rates against your age, state, premium, tax status, and income goal before choosing a product or account route.
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