Interest Rates: Advantage Annuity
Top MYGA rates typically run 0.50%-1.00% higher than comparable bank CDs. On $200K over 5 years, that could mean $5K-$10K more. Insurance companies face different regulatory requirements and can invest in longer-duration bonds
Taxes: Advantage Annuity (Usually)
Bank CD: You pay taxes on interest every year, even if you don't withdraw (phantom income). Annuity: Taxes are deferred until you withdraw. Your interest compounds without annual tax drag. If you're in a 24% bracket and earn $10K on a CD, you owe $2,400 that year whether you need the money or not.
Payout Options
Life Only: Highest payment, stops at death. Life with Period Certain: Guarantees minimum years (10, 15, 20). Joint and Survivor: Covers both spouses. Cash/Installment Refund: Returns remaining premium to beneficiaries if you die early.
Liquidity: Advantage CD
Bank CD: Early withdrawal penalty is typically 3-12 months of interest. Annoying but not catastrophic. Annuity: Surrender charges are steeper — often 7% in year one, declining over 5-7 years. If you might need the money, CD's lighter penalty structure wins.
Protection: Different, Not Better or Worse
Bank CD: FDIC insured up to $250K. Annuity: State guaranty associations, typically $250K-$500K per carrier. Both are highly safe — just different systems.
When to Choose Each
Choose CD if: You might need money early, want simplicity, under $250K and want FDIC, low tax bracket. Choose MYGA if: Confident you won't need money for full term, want higher rate, higher tax bracket, want to lock in rates for 7-10 years.