Annuity (MYGA) vs Certificate of Deposit (CD)

CDs (Certificates of Deposit) and Multi-Year Guaranteed Annuities (MYGAs) are both considered safe, low-risk options for saving and growing money, especially for conservative investors. They share similarities in offering guaranteed interest rates for a fixed period. However, key differences exist in their nature, providers, regulations, terms, withdrawal penalties, tax treatment, and features: 

Nature and providers

• CDs: Savings products offered by banks and credit unions. They are a type of savings account with a fixed interest rate and a fixed time period.
• MYGAs: Fixed deferred annuity contracts issued by insurance companies, designed primarily for retirement savings. 

Safety and protection

• CDs: Federally insured by the FDIC (or NCUA for credit unions) up to $250,000 per depositor, per institution.
• MYGAs: Backed by the financial strength and claims-paying ability of the issuing insurance company. State guaranty associations offer some protection in the event of an insurer's insolvency, typically up to $250,000 in most states. It is important to research the financial strength ratings of any insurer before purchasing a MYGA. 

Terms and liquidity

• CDs: Generally available for terms ranging from a few months to five years. CDs usually impose early withdrawal penalties (loss of interest) if funds are withdrawn before the maturity date. Some no-penalty CDs offer more flexibility with lower rates.
• MYGAs: Typically offer longer terms, ranging from one to ten years. MYGAs are less liquid than CDs, and withdrawing funds before the surrender period ends may incur surrender charges and potentially a market value adjustment (MVA), depending on the contract. Many MYGAs allow penalty-free withdrawals of a certain percentage of the account value each year. 

Interest rates

• CDs: Interest rates are fixed for the duration of the term and are generally lower than MYGA rates for comparable terms.
• MYGAs: Typically offer higher interest rates than CDs for the same term lengths.  Check out our current rates below.

Tax treatment

• CDs: Interest earned is taxed as ordinary income in the year it's earned, even if it's not withdrawn.
• MYGAs: Offer tax-deferred growth, meaning taxes are not paid on the interest until funds are withdrawn. This can be a significant advantage, especially for those in high tax brackets or looking to defer taxes until retirement, when they may be in a lower bracket. 

Features

• CDs: Generally straightforward with limited features.
• MYGAs: Can be more complex with various optional features or riders, such as return of premium or income riders, which may come with additional costs or lower base rates. 

A flexible premium deferred annuity is a simplified product offering that is used to grow your money over time. While most annuities only allow for a single payment, this flexible product gives you the choice of making just one contribution or a series of payments—whichever better fits your budget. Because this annuity is tax-deferred, your money is not taxed until it’s withdrawn, so it will keep accumulating over time with a guaranteed minimum crediting interest rate. Minimum deposit to open a flexible annuity is $100.