All three are considered "safe" money — but they behave very differently on rate, taxes, and what happens if rates move. Here's a clear, side-by-side look at all three.
A bank CD, a bond, and a fixed annuity (MYGA) are often lumped together as "safe" choices — but each one works differently under the hood. Understanding the mechanics helps you see where each actually fits.
| Feature | Bank CD | Individual Bond | Fixed Annuity (MYGA) |
|---|---|---|---|
| Rate | Guaranteed for the term | Set coupon; resale price varies | Guaranteed for the full term |
| Value before maturity | Fixed — doesn't fluctuate | Moves with interest rates | Fixed — doesn't fluctuate |
| Tax treatment | Interest taxed every year | Interest usually taxed yearly | Tax-deferred until withdrawal |
| Backed by | FDIC, up to $250,000 | The issuer (government or company) | The insurer + state guaranty association |
| Early access | Early-withdrawal penalty | Sell anytime, at market price | Free withdrawals (often ~10%/yr); surrender charges beyond that |
| Typical rate vs. the others | Often the lowest of the three | Varies with credit quality & term | Often the highest of the three |
| Complexity | Simple — set it and leave it | Can require active management or laddering | Simple — set it and leave it |
This is the difference most people overlook, and it applies to both CDs and most bonds. With a CD — or a bond held outside a retirement account — you owe taxes on your interest every single year, even if you never touch it. 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.
A higher headline rate isn't the only reason a MYGA can come out ahead — the tax deferral does quiet work in the background. Everyone's tax situation is different, so confirm the specifics with a tax professional.
If you own an individual bond and interest rates rise, the market value of your bond falls — if you needed to sell before maturity, you could get back less than you paid. A CD and a MYGA don't carry this risk: both lock in a rate and hold a fixed value for the term, regardless of what the broader rate market does.
A bond can lose value if you have to sell early in a rising-rate environment. A CD or MYGA's value stays put — you know exactly what you'll have at the end of the term. That predictability is the whole point of both, which is part of why MYGA rates and CD rates are so often compared directly.
Many retirement plans use a mix of all three. The point isn't that one is "better" across the board — it's understanding what each one actually does, so the safe part of your plan is built the way you want it.
No pressure, no obligation. Explore the rate tool, take the 2-minute quiz, or ask Devin anything — whatever helps you understand your options.