A multi-year guaranteed annuity often pays more than a CD and defers the tax. A CD is easier to get out of and is FDIC-insured. Here is how to decide.
A multi-year guaranteed annuity, or MYGA, works like a CD from an insurance company: a fixed rate, locked for a set number of years. In early October 2026, 5-year MYGAs from carriers rated A- or better paid roughly 5.30% to 6.00%, while the best 5-year bank CDs paid about 4.50% and the national average was 1.79%. The rate gap is only part of the decision.
Rates: Annuity.org MYGA survey (late September 2026) and Bankrate CD survey (October 5, 2026). Rates change daily. Texas creditor protection has exceptions.
A hypothetical $100,000 for five years, in a 24% federal bracket. Texas has no state income tax.
The MYGA comes out about $5,000 ahead in this example: about half from the higher rate and half from not paying tax along the way. If you would be in a lower bracket when you withdraw, as many retirees are, the gap grows. If a large withdrawal pushes you into a higher bracket, it shrinks.
Hypothetical example. The CD figure assumes interest is taxed each year at 24% and reinvested; the MYGA figure assumes 5.50% compounded annually and a single withdrawal taxed at 24%. Not tax advice.
An IRA already defers taxes, so a MYGA’s tax deferral adds nothing there. Inside an IRA, compare the rate, access and safety directly. Many MYGAs let you take required minimum distributions without a surrender charge, but check the contract.
At maturity there is usually a short window, often around 30 days, to withdraw, renew at the insurer’s new rate, or move to another annuity through a 1035 exchange, which generally avoids tax. If you do nothing, the contract may renew automatically, so check what it renews into before the window closes. The rules for heirs are different from a CD’s: deferred interest becomes taxable to them. How inherited annuities are taxed.
MYGA rates from the Annuity.org rate survey (late September 2026); CD rates from Bankrate (October 5, 2026); deposit insurance limits from the FDIC. Annuities are not FDIC-insured; their guarantees depend on the issuing insurer’s claims-paying ability. Rates change daily, and the figures here are illustrative, not quotes. How fixed index annuities differ from MYGAs.
Neither is better for everyone. In early October 2026, 5-year MYGAs from carriers rated A- or better paid roughly 5.30% to 6.00%, against about 4.50% for the best 5-year CDs, and MYGA interest is tax-deferred. CDs are FDIC-insured, cheaper to leave early and have no age-59½ penalty.
They are protected differently. A CD is FDIC-insured up to $250,000 per depositor, per bank, per ownership category. A MYGA is not FDIC-insured; its rate and principal are guaranteed by the insurance company, so check the carrier's financial strength rating before you buy.
Not in a MYGA held outside an IRA: the interest grows tax-deferred until you withdraw it, then it is taxed as ordinary income, gains first. Withdrawals of gains before age 59½ generally face a 10% IRS additional tax. CD interest is taxable every year, even if you leave it in.
Many MYGAs allow some penalty-free withdrawals, often the interest or up to 10% a year, sometimes not in the first year. Beyond that, a surrender charge applies and sometimes a market value adjustment. A CD's early-withdrawal penalty is usually a set number of months' interest.
There is usually a short window, often around 30 days, to withdraw, renew at the insurer's new rate, or move to another annuity through a 1035 exchange, which generally avoids tax. If you do nothing, the contract may renew automatically, so check what it renews into.
It can, but the tax-deferral advantage disappears because the IRA already defers taxes. Inside an IRA, compare rate, access and safety directly, and check that the contract allows required minimum distributions without a surrender charge.
