Annuities·8 min read

Fixed Annuity vs. CD: Which Pays More in 2025?

Bank CDs are paying around 4–5%. Fixed annuities are paying 5–9%+. Here's how the two compare on safety, growth, taxes, and access.

Key Takeaways

1
Top fixed annuities currently pay 5–9%+ vs. 4–5% on top CDs.
2
Both offer principal protection, but through different mechanisms (FDIC vs. insurance carrier reserves).
3
Annuity earnings grow tax-deferred; CD interest is taxed annually.
4
Annuities have surrender periods (3–10 years); CDs have shorter terms but penalties for early withdrawal.

The headline difference

In 2025, top-tier multi-year guaranteed annuities (MYGAs) from A-rated carriers are paying 5–9% per year. Top jumbo CDs are paying 4–5%.

On a $250,000 deposit over 5 years, that's a difference of roughly $30,000+ in extra growth — assuming the same risk profile, which we'll examine below.

Safety: how each protects your money

CDs are FDIC-insured up to $250,000 per depositor per bank. That's federal government backing.

Fixed annuities are backed by the issuing insurance carrier and your state's guaranty association (typically up to $250,000 per carrier). We only place clients with A-rated carriers, which adds carrier-strength as a third layer of protection.

Taxes: deferred vs. annual

CD interest is taxable in the year it's earned, even if you don't withdraw it. That can push retirees into a higher tax bracket and reduce Social Security benefits.

Annuity earnings grow tax-deferred. You only pay income tax when you withdraw — letting compound growth work harder over 5–10+ years.

Access to your money

CDs lock your money for the term (3 months to 5 years typically). Early withdrawal penalty is usually 3–12 months of interest.

Fixed annuities have surrender periods of 3–10 years. Most allow penalty-free withdrawals of 10% per year, plus access for terminal illness or nursing home confinement.

Frequently Asked

Are annuity rates really guaranteed?+

Yes. MYGA rates are contractually locked in for the entire term, just like a CD rate. They cannot be reduced by the carrier.

Should I move my entire CD portfolio to annuities?+

Not necessarily. Most retirees benefit from a blend — keep 6–12 months of expenses fully liquid (savings or short CD), then put longer-term funds into annuities for the rate advantage.

Source: FDIC — Deposit Insurance Coverage ↗

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