MYGA rates vs CDs: compare the number you actually keep

If the last article on this site compared a fixed indexed annuity to a CD, this one is the cleaner rate conversation. A multi-year guaranteed annuity — a MYGA — credits a stated rate for a stated term. That is why people put it next to a CD. The comparison is fair only if you compare more than the headline percentage.

As of early September 2026, competitive five-year CDs at online banks are often in the mid-4% APY range; Bankrate’s national average for a five-year CD sits far lower, around 1.75%. Competitive five-year MYGA rates, depending on the carrier’s financial strength and the premium, have recently clustered in the mid-5% range, with some offers higher. Those figures move. They are a snapshot, not a quote.

The highest MYGA rate in a table is not the rate you should buy. The rate you can explain — from a company you would trust to be there in year five — is the one that matters.

What a MYGA rate actually is

A MYGA is a fixed annuity. The insurer credits a declared interest rate for a set number of years — commonly three, five, seven, or ten. You know the rate on day one. You know the term. At the end of the guarantee period you can take the value, renew, or 1035-exchange into another contract, subject to the contract and tax rules.

• It is an insurance contract, not a bank deposit.
• The rate is a contractual credit — not an FDIC APY.
• Guarantees depend on the issuing insurer’s claims-paying ability, with state guaranty association coverage as a backstop that has its own limits.
• Most contracts allow a limited penalty-free withdrawal each year. Taking more during the surrender period costs you.

Line the rates up — then adjust for tax

On a non-qualified CD, interest is generally taxable in the year it is credited. The APY on the door is not the after-tax yield. In a 24% federal bracket, a 4.40% CD is about 3.34% after federal tax, before state tax. The CD still has FDIC or NCUA coverage inside the limits. That protection has a price, and part of the price is the tax bill along the way.

A MYGA in a non-qualified contract is tax-deferred. Interest can compound without a 1099 each year. When money comes out, gain is generally taxed as ordinary income. Deferral is not a tax-free gift. It is a timing difference — and for money you do not need this year, compounding before tax is one reason a MYGA rate can look higher and still be the wrong tool if you need the cash next spring.

• CD: stated APY, usually taxed as earned, FDIC or NCUA within limits.
• MYGA: stated rate for the term, tax-deferred until withdrawal, insurer risk plus guaranty-association limits.
• IRA or other qualified money: the tax treatment of the two products converges. Then the comparison is rate, liquidity, fees, and who stands behind the promise.

Do not shop rate in a vacuum

The top number on a “best MYGA rates” page is often from a smaller or lower-rated carrier, a higher minimum premium, or a contract with little or no free withdrawal. Stronger carriers — the ones rated at the top of AM Best’s scale — frequently credit a little less. That spread is information. It is the market pricing the promise.

This office is independent. The work is to compare rate, term, free-withdrawal provision, market-value adjustment, and the insurer — not to send every dollar to whoever printed the largest percentage this week.

When the CD still wins

Use a CD when you need a known dollar amount on a known date, you want bank or credit-union insurance inside the coverage limits, and you might need the money when the term ends — or sooner, and you can live with the early-withdrawal penalty. Near-term cash does not belong in a seven-year surrender schedule just because a table showed 6%.

When a MYGA belongs in the conversation

A MYGA belongs in the conversation when a slice of savings has a multi-year horizon, you want a stated rate without market risk, and tax deferral on non-qualified money would actually be used. It is still not a lifetime paycheck. If the job is income you cannot outlive, that is an income annuity or a living-benefit design — a different contract.

Fixed indexed annuities, fixed multi-year guaranteed annuities, and income annuities are insurance contracts — a paycheck from an insurer, not a market bet. A CD is a deposit. Put the rate next to the job, the tax, and the company. Then decide.

If you want current MYGA rates shopped against the CDs you already own — term, tax bracket, and carrier strength on the table — that is a conversation this office is built for.

This is education, not a quote, not an offer, and not personalized financial, investment, tax, or insurance advice. Rates cited above are public market context as of early September 2026 and change. Ted Byrer is a licensed insurance professional — not a registered investment adviser — and does not offer securities or bank deposits. MYGAs are insurance contracts, not FDIC insured, not bank products. Guarantees depend on the issuing insurer. CD coverage depends on the institution and applicable FDIC or NCUA limits. Withdrawals of annuity gain are generally taxed as ordinary income; withdrawals before age 59½ may also face an IRS penalty. Availability varies by state and carrier.