ANNUITIES
MYGA vs CD: How the Two Actually Differ
Both pay a stated rate for a set term. The differences that matter are who stands behind the money, how you get out early, and when the interest is taxed.
By Charles Mungovan, Founder, licensed insurance producer · Published 2026-09-19 · Last reviewed 2026-09-19
The short answer
A multi-year guaranteed annuity (MYGA) is an insurance contract issued by an insurance company. A certificate of deposit (CD) is a deposit account at a bank or credit union. Both credit a stated rate for a defined term, which is why they get compared — but they are different products, backed differently, taxed differently, and exited differently.
Who stands behind the money
This is the difference that matters most, and it is the one most often glossed over. A CD held at an FDIC-insured bank is a deposit, and deposits are insured by the FDIC within the applicable limits and ownership-category rules. A MYGA is not a deposit. The FDIC does not cover annuities, and a MYGA’s guarantee is a contractual promise from the issuing insurer that depends on that insurer’s claims-paying ability.
Guarantees apply only as described in the issued contract and depend on the claims-paying ability of the issuing insurer. Annuities are not bank deposits, are not FDIC or NCUA insured, and are not guaranteed by any federal government agency.
Getting out early
A CD generally has an early-withdrawal penalty set by the bank, often expressed as a number of months of interest. A MYGA limits access differently: the contract defines a free-withdrawal amount, and withdrawals above it during the surrender period can trigger a surrender charge. Some MYGA contracts also apply a market value adjustment, which can increase or decrease the amount received depending on how rates have moved and on the contract’s own terms.
In practice that means the exit cost on a CD is usually simple to state in advance, while the exit cost on a MYGA depends on the contract, the year, and in some cases on interest rates at the time.
When the interest is taxed
Interest credited to a CD held outside a retirement account is generally taxable in the year it is credited, whether or not it is withdrawn. Interest inside a non-qualified annuity generally accumulates tax-deferred and is taxed as ordinary income when withdrawn, and withdrawals before age 59½ may be subject to an additional 10% federal tax. Tax deferral is not tax elimination, and the right comparison depends on your own tax situation. Consult a tax professional.
The end of the term
A CD at maturity is typically paid out or renewed, often automatically, under the bank’s terms. A MYGA at the end of its guarantee period usually presents several choices defined in the contract — take the money, renew at a newly declared rate, move to another contract, or begin a payout option. Those choices, and any window for making them, are contract-specific and worth reading before the term ends rather than after.
What to compare, side by side
- Who issues it, and what is the basis of the guarantee — deposit insurance or an insurer’s claims-paying ability.
- The exact term length, and what happens on the day it ends.
- How much can be withdrawn each year without a charge.
- The cost of an early exit, including whether a market value adjustment applies.
- Whether interest is taxed annually or deferred, and how that fits your situation.
- Any waivers — for confinement or terminal illness, for example — and the conditions attached to them.
- For a MYGA, the issuing insurer’s financial strength and what the ratings actually mean.
The applicable rate is established under the issuing carrier’s contract and issue process and may change before the contract is issued. A consumer does not receive a rate until a contract is issued.
Neither one is better in general
A CD tends to suit money that may be needed sooner, where simplicity and deposit insurance matter more than tax treatment. A MYGA tends to be discussed for money that can stay put for the full term, where tax deferral is useful and the owner is comfortable with the insurer standing behind the contract. Which fits depends on the time horizon, the tax situation, and how much liquidity is genuinely needed — not on which product sounds safer in the abstract.
Educational information only. This page is not individualized insurance, investment, tax, legal, or accounting advice, and it is not a recommendation to buy or replace any product.