Fixed annuities and CDs are close cousins — both safe, both guaranteed. Here's how they really differ on rates, taxes, and access, so you can see which fits your situation.
If you like the safety of a bank CD, a fixed annuity (specifically a MYGA) will feel familiar — they're close cousins. Both give you a guaranteed rate for a set number of years with no market risk. But there are a few important differences that can meaningfully change your bottom line.
A MYGA (Multi-Year Guaranteed Annuity) is a fixed annuity that pays a guaranteed interest rate for a set term — just like a CD pays a fixed rate for its term. The difference is in the rate, the taxes, and who stands behind it.
This is the difference most people overlook. With a CD, you owe taxes on your interest every single year — even if you leave it in the account. With a MYGA, you don't pay any taxes on the growth until you actually withdraw it. That means your money compounds on dollars that would otherwise have gone to the IRS each year.
Over a multi-year term, that compounding-on-untaxed-money effect can add up — especially if you're in a higher tax bracket now than you expect to be when you eventually withdraw.
A higher headline rate isn't the only reason a MYGA can come out ahead — the tax deferral does quiet work in the background. But everyone's tax situation is different, so confirm the specifics with a tax professional.
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