CDs vs MYGAs

Written By Kyle Steiner

When it comes to protecting and growing money, many people choose the path toward products like Certificates of Deposit (CDs) or annuities. Both are popular choices for those looking to safeguard the principal while earning a steady return. However, the nuances between different financial products can make a big difference in terms of returns, liquidity, and overall financial strategy.

What Is a Multi-Year Guaranteed Annuity (MYGA)?

A multi-year guaranteed annuity (MYGA) is a type of fixed annuity that offers a guaranteed interest rate for a specific duration. These annuities are designed to provide a steady, guaranteed return on your initial capital, making this product a good option for risk-averse savers who want to ensure their principal is protected.

Key Features of a MYGA:

  • Guaranteed Interest Rate: The interest rate is locked in for the entire term, regardless of market fluctuations.

  • Tax-Deferred Growth: Earnings on the annuity are tax-deferred until you begin taking withdrawals.

  • No Market Risk: This type of annuity is not exposed to the stock market, so they are not exposed to market volatility.

Axonic Insurance Services offers MYGAs with competitive interest rates, providing a reliable source of growth for your investment without exposing you to the risks associated with the stock market.

What Is a Certificate of Deposit (CD)?

A certificate of deposit (CD) is offered by banks and credit unions. When you invest in a CD, you agree to leave your money in the account for a fixed period, ranging from a few months to several years. In return, the bank pays you a guaranteed interest rate.

Key Features of a CD:

  • Guaranteed Return: Like a MYGA, a CD offers a fixed interest rate for the term of the deposit.

  • FDIC Insurance: CDs are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per bank, providing a layer of security for your investment.

Comparing Axonic Insurance Services’s MYGA and a CD

1. Interest Rates

Interest rates are often the first point of comparison. Generally, MYGAs offer higher interest rates than CDs, especially for longer terms. Axonic Insurance Services, known for its competitive MYGA offerings, often provides interest rates that can outpace those available through CDs of similar lengths. This makes MYGAs more attractive to investors looking for a higher return over a fixed period.

2. Tax Considerations

One of the significant advantages of a MYGA over a CD is tax deferral. With a MYGA, your earnings are not taxed until you withdraw the funds, allowing your investment to compound over time. Interest earned on a CD is typically subject to taxes in the year it is earned, which can diminish your overall return.

3. Liquidity

Liquidity can be a critical factor depending on your financial needs. CDs are generally more liquid than MYGAs. If you need to access your money before the CD matures, you can do so, though you might have to pay a penalty, often a few months’ worth of interest.

MYGAs, however, are less liquid. If you withdraw funds before the end of the guaranteed period, you may face surrender charges and potential tax penalties if you’re under the age of 59½. Therefore, MYGAs are better suited for investors who are confident they won’t need access to their funds before the end of the term.

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As you navigate life's ups and downs, ensuring financial security for your tomorrows becomes paramount. To learn more about the benefits of a MYGA from Axonic Insurance Services, please visit www.axonicinsuranceservices.com/products.

For a deeper exploration into the difference between CDs and MYGAs, you can download our public-facing tool here.

To get started with a MYGA from Axonic Insurance Services, please contact your financial professional. If you are a financial professional, you can view your contact options here.

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Annuities are designed for long-term accumulation of money; surrender and withdrawal fees may apply on early withdrawals. Annuity withdrawals are subject to income tax, and withdrawals prior to age 59½ may also be subject to an IRS penalty. Holding an annuity inside a tax-qualified plan does not provide any additional tax benefits. If you annuitize a non-qualified annuity, a portion of your payment will be considered a return of premium and will not be subject to ordinary income tax. The amount that is taxable will be determined at the time you elect to annuitize the policy.

This blog provides a brief summary of product features. The contract associated with the product will contain the actual terms, definitions, limitations, and exclusions that apply. Products and services may not be available in all states.

The statements and comments offered in this communication are provided as general information and ideas. They are not intended to be, nor should they be relied on as, investment, legal, tax advice, or recommendations. Before making a decision or giving advice about any matter contained in this communication, agents or individuals should consult an attorney or tax advisor for answers to specific questions. All individuals selling this product must be licensed insurance agents.

The general distributor and service provider is Axonic Insurance Services LLC. Products are underwritten by AmFirst Insurance Company (“AmFirst”) (Statutory Office: Oklahoma City, Oklahoma), licensed in 47 states, the District of Columbia, British Virgin Islands, and Puerto Rico.

Not FDIC/NCUA Insured | May Lose Value | Not Bank/CU Guaranteed | Not a Deposit | Not Insured by Any Federal Government Agency 

Kyle Steiner