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Fixed Multi-Year Guarantee Annuities vs. CD’s
Fixed Multi-Year Guarantee Annuities and CD’s are common choices for individuals looking to accumulate wealth in a safe and conservative manner.  Both vehicles allow a purchaser to choose the number of years they may lock in a rate and the corresponding interest rate.  There are differences of the two products and advantages to both

Short-Term & Long-Term – Withdrawals from a Fixed Multi-Year Guarantee Annuity are penalized if taken prior to 59 ½.  Due to this provision CD’s are better situated for a short-term time horizon unless the purchaser is already 59 ½.  Fixed Multi-Year Guarantee Annuities grow tax deferred on a compounding basis and thus are a superior opportunity for long-term wealth accumulation. 

Taxation – The interest earned on CD’s is taxable on an annual basis.  Interest earned on a Fixed Multi-Year Guarantee Annuity is tax deferred and not taxed until withdrawals are taken.  This tax deferral benefit allows for compounding growth on interest and the ability to delay taxes until money is needed.  This tax deferral may allow the avoidance of taxation during higher earning working years and taxation in lower tax bracket years during retirement.  In addition deferred annuity interest is not used in calculating the provisional income test to determine whether or not your Social Security will be taxable.   The interest on your CD’s is added into the provisional income test making it more likely that your Social Security will be taxable.

Probate – CD’s are subject to probate court.  Fixed Multi-Year Guarantee Annuities are not subject to probate as you designate beneficiaries during the purchase of your contract.

Safety – CD’s are backed by FDIC insurance up to $250,000 per depositor.  Fixed-Multi Year Guarantee Annuities are guaranteed by the claims paying ability of the issuing insurance company regardless of the dollar amount.

Creditor Protection – Fixed Multi-Year Guarantee Annuities provide varying degrees of creditor protection depending on your state laws.  CD’s are not creditor protected.

Lifetime Income – While one can withdraw a lump sum from a Fixed Multi-Year Guarantee Annuity at the end of its term just like in a CD, a CD cannot provide a lifetime income.  A Fixed Multi-Year Guarantee Annuity may be annuitized to provide an income stream that a purchaser cannot outlive.

Fixed MYGA Compared to CD's Fixed MYGA CD's
Tax Deferred YES NO
Avoid Provisional Income Test YES NO
Avoid Probate YES NO
Creditor Protection YES NO
Lifetime Income YES NO


Contact an expert to see if a Fixed Multi-Year Guarantee Annuity may be right to help you achieve your goals

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