Enter a search term.
line drawing document and pencil

File a claim

Need to file an insurance claim? We’ll make the process as supportive, simple and swift as possible.

Action Teams

If you want to make an impact in your community but aren't sure where to begin, we're here to help.
Illustration of stairs and arrow pointing upward

Contact support

Can’t find what you’re looking for? Need to discuss a complex question? Let us know—we’re happy to help.
Use the search bar above to find information throughout our website. Or choose a topic you want to learn more about.

Multi-year guaranteed annuity (MYGA) vs. certificate of deposit (CD)

Man looking into the distance

Multi-year guaranteed annuities (MYGAs) and certificates of deposit (CDs) are two solutions that help protect your money while providing the opportunity to build returns at the same time. Neither a MYGA or CD is tied to market performance, but both can offer competitive yields.

There are notable differences to be aware of before making a decision if one, or both, fit into your financial plan.

What is a multi-year guaranteed annuity?

A multi-year guaranteed annuity is a type of fixed deferred annuity that guarantees a specific interest rate for a predetermined time period, typically between three and nine years. The interest rate on a MYGA is typically higher than that of a traditional fixed annuity, making it an attractive option for people looking for dependable, guaranteed growth.

What is a certificate of deposit (CD)?

A certificate of deposit is a type of account offered by banks and credit unions. You make a deposit and agree to leave your money in the account for a certain period of time in exchange for a higher interest rate. Because the interest rate is fixed, a CD can be a low-risk way to grow your savings.

MYGA vs. CD: Comparing the differences

Multi-year guaranteed annuities and certificates of deposit are both relatively low-risk investment options that offer a fixed rate over a specified period of time. There are some key differences between the two.

Where you get them.

  • MYGAs are offered by insurance companies. When purchasing a MYGA, you invest a lump sum of money that's considered a premium payment on your contract.

  • CDs are accounts offered by banks and credit unions. With a CD, the amount you put in is considered a deposit in an account.

How they’re protected

  • MYGAs are contracts sold by financial insurance companies, so they don't have FDIC protection. Instead, they’re backed by the insurance company that you purchased your MYGA from. It’s important to vet the strength and stability of the company you choose by reviewing reports from A.M. Best, Fitch, Moody's or Standard & Poor's.

  • Because CDs are accounts held with banking institutions, they're insured by the FDIC up to a certain amount, typically $250,000 per account holder per institution.

Interest rates

  • MYGAs typically offer higher interest rates and longer time periods than CDs. Periods range from 3-10 years. Generally, longer time periods offer higher interest rates.

  • CDs are issued for time periods ranging in increments of months, such as 3 months, 6 months, 12 months, 18 months, 24 months or 36 months. The longest term is typically 60 months or five years.

The interest rates on both MYGAs and CDs are fixed for the entire term.

How they’re taxed

  • A MYGA is tax-deferred, so earnings are not taxed until the money is withdrawn. This helps your invested dollars accumulate at a faster rate due to compound interest. With compound interest, your earnings grow based on your original investment and interest earned. In other words, the interest you earn each year gets added to your account balance. Then, the next year's interest is calculated based on the new, larger balance, so your earnings grow at an accelerated rate. Taxable withdrawals before age 59½ may also be subject to a 10% federal tax penalty.

  • CD interest is taxed annually, which slows the growth of compound interest. However, it's worth noting that CDs held within an individual retirement account (also called a CD IRA), may also grow tax-deferred.

Early withdrawals & surrenders

Both MYGAs and CDs are designed for you to leave your money invested until the end of the term.

  • With MYGAs, surrender charges may apply if you withdraw more than the annual maximum amount allowed. As a result, you may not earn interest on a portion of the money you originally contributed to the MYGA. Withdrawals subject to surrender charges in the MYGA version with Market Value Adjustment (“MVA”) are also subject to the interest rate on the date of withdrawal. MVA is an adjustment—either positive or negative—to the accumulated value if you make a partial surrender above the free amount or fully surrender your contract during the surrender charge period.

  • With CDs, interest rate penalties may apply for early withdrawals. This means you may lose interest but not the principal amount contributed to the CD. This makes CDs more flexible than MYGAs with regard to early withdrawals.

Options at the end of the term

  • At the end of a MYGA term, you may have the option to renew for a new multi-year period; leave the money in a fixed account, select a settlement option for guaranteed annuity payments; or take a full or partial withdrawal.

  • With a CD, you can withdraw all the money at the term's end, including your deposit plus the earned interest, or renew for the same term. You also could use the proceeds to purchase a new CD with a different term.

Death proceeds & probate

  • A MYGA's death benefit will be distributed to beneficiaries and isn't subject to probate.

  • For CDs, death proceeds may be subject to probate. However, that can be avoided if the CD is held inside an IRA.

MYGA vs. CD at-a-glance

What it is
An annuity product that pays a fixed interest rate
A savings product that pays a fixed interest rate
Who issues it
Insurance company
Bank or credit union
FDIC coverage
No, guarantees are backed by issuing insurance company
Interest rates
Guaranteed for term and often higher than CDs
Guaranteed for term and often lower than MYGAs
Tax-deferred growth
Interest is taxed as annual income
Early withdrawals
Surrender charges may apply; may lose interest and principal; if you have a Market Value Adjustment (MVA), withdrawals may affect your accumulated value
Penalty for early withdrawal; may lose interest only
End-of-term options
Renew for a new multi-year period at a new rate, leave the money in a fixed account, withdraw the accumulated balance or choose a settlement option
Renew for another term at a new rate or withdraw the accumulated balance

Get more guidance on MYGAs & CDs

A MYGA may be best if you want a higher yield and plan to keep your money in the annuity for several years. You could also run into higher minimum investment requirements with a MYGA. A CD may be better if you're saving for a financial goal within one to three years and have a smaller amount to invest.

Ultimately, the choice between a MYGA vs. CD depends on your personal financial goals. Carefully evaluate the terms and conditions of any CD or annuity before making your decision. A financial advisor can help you determine the benefits and risks of these options.

This webpage provides general annuities information. It does not contain information specific to a Thrivent financial product. If you are looking for information specific to a Thrivent financial product or your existing annuity contract, please log in and refer to your contract or prospectus document—or visit our annuities product webpage.

Annuities are intended to be long term, particularly for retirement. Product availability and features may vary by state.

Guarantees based on the financial strength and claims paying ability of Thrivent.

Holding an annuity inside a tax-qualified plan does not provide any additional tax benefits.

Thrivent and its financial professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.

If requested, a licensed insurance agent/producer may contact you and financial solutions, including insurance may be solicited.