What is an annuity and how does it work?

An annuity is a contract between you and an insurance company. You deposit a lump sum and the insurer guarantees your principal, provides interest or growth, and can convert your savings into guaranteed lifetime income.

Fixed and fixed indexed annuities are among the safest financial products available. Your principal is guaranteed by the issuing insurance company and backed by state guaranty associations.

How do annuity rates compare to CDs?

Multi-Year Guaranteed Annuities (MYGAs) typically offer higher interest rates than bank CDs for comparable terms, and your interest grows tax-deferred — unlike CDs where interest is taxed annually.

Annuity Education

Annuities vs. CDs — Which Is Better for Retirement Savings?

A straightforward comparison of annuities and bank CDs for conservative retirement savers.

If you are a CD buyer looking for better rates, a Multi-Year Guaranteed Annuity (MYGA) is worth comparing. MYGAs work similarly to CDs — you deposit a lump sum, lock in a rate for a set term, and your principal is guaranteed. But MYGAs typically offer higher rates and tax-deferred growth.

Annuity vs. CD — Full Comparison

Feature	MYGA Annuity	Bank CD
Interest Rate	Typically higher (5.20–5.45% for MYGAs)	Typically lower
Tax Treatment	Tax-deferred growth	Interest taxed annually
Principal Safety	Guaranteed by insurance company + state guaranty	FDIC insured up to $250K
Contribution Limits	No limit (non-qualified)	No limit
Penalty-Free Access	Typically 10%/year free withdrawal	Varies by bank
Early Withdrawal	Surrender charge + IRS penalty if under 59½	Early withdrawal penalty
Lifetime Income Option	Yes — can convert to guaranteed lifetime income	No
Probate Avoidance	Yes — passes directly to beneficiaries	No (goes through estate)

When a MYGA Makes More Sense Than a CD

You want a higher guaranteed rate
You want tax-deferred growth
You are saving for retirement (not short-term needs)
You want the option of lifetime income
You want to avoid probate for your beneficiaries
You have more than $250K to protect

Compare Annuity Rates vs. Your Current CD Rate

We'll show you what you could be earning with a MYGA vs. your current CD.

Annuity vs. CD FAQs

See How a MYGA Compares to Your Current CD Rate

Get a free, side-by-side comparison of current MYGA rates vs. bank CD rates for your situation.

Call (800) 555-1234