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Annuities vs. CDs

Stan Haithcock
September 17, 2023
Annuities vs. CDs

Hi there, Stan The Annuity Man, America's annuity agent, licensed in all 50 states and proud of that. I love America. I might sing God Bless America after this. Maybe, depending on how it goes with the topic, Annuities Versus CDs. People are always like, "Annuity or CD?" Well, first of all, you can't use the word annuities to describe the category. There are many types of annuities, so I will break that down and let you know how to compare the specific annuity type that is a CD with a CD and how to use them in combination.

Multi-Year Guarantee Annuity

Let's talk about annuities versus CDs. Annuities, you can't say annuities. It's like saying restaurants. Okay? It's like saying trucks. It's like saying shoes. Annuities have many different types. But let's talk about the type you can compare to a CD. The annuity industry has its own version of its CD. It's called a Multi-Year Guarantee Annuity. MYGA is the acronym.

Now, let's talk about a CD. You give money to a bank or a brokerage firm, and they guarantee an interest rate for a specific period of time. Nod your head. MYGAs. Annuity industry version of a CD. You give the money to the life insurance company that issues the annuity MYGA. They guarantee an interest rate for a specific period of time. Sounds the same? Yeah, it's because it is.

FDIC Insured

So, you can choose whatever durations you want. And I love CDs, I don't sell them. But in combination with MYGAs and treasuries, you literally can protect your principal, not pay any fees, and peel off the interest for income if you need it. Now, let's discuss the difference between CDs and MYGAs: CDs are great products. FDIC insured. F means we're going to fricking come get your money. We're going to fricking tax you for it, and we're going to fricking confiscate it to back up that claim of the CD. You didn't know that did you? That F stands for fricking? It does. It also stands for Federal.

Claims Paying Ability

But the point is that it's the best coverage on the planet. FDIC. If you're buying it from a brokerage firm, it's SIPC. But that's still very, very good coverage. Looking at the coverage from the annuity, from the MYGA side, you should buy the MYGA for that carrier's Claims-Paying Ability. Yes, there are state guarantee funds that back it up, but you should focus solely on the carrier's Claims-Paying Ability. If you want to go to the state guarantee fund site and look up your state, it's . But if you wanted to rank CDs and MYGAs, CDs are safer from the standpoint of the insurance behind them. In my opinion, MYGAs are as secure because the annuity industry self-regulates and annuity companies cannot do stupid things with your money legally, and they don't. That's the reason you don't see a lot of issues with these companies.

But MYGAs also, we're looking at those. We're dating those companies. We're only going to be there for the duration. In other words, if you buy a three-year MYGA, you say, "Okay, buy a three-year MYGA, what are we doing? Say we do an A plus, A double plus, A minus, or B double plus." It depends on the duration, but there might be a time when I say A minus or B double plus for that three-year duration, which makes sense because they can back up the claim. We've looked at their financials to back up the claim for that three-year duration. And you're good to go because we won't be there after the three-year duration. We will either send the money back to you in full with interest, or we will roll it to another MYGA.

Less Than or More Than 3 Years?

Now, MYGAs versus CDs, how do you choose between the two? Very, very simple. I've come up with an easy way to do that. Suppose the duration that you want to lock in is less than three years, six months, a year, 12 months, 18 months, 24 months, CDs, and treasuries. Do I sell CDs and treasuries? No, I do not. But this is the truth. And I tell the truth because my grandfather told me if you tell the truth, you don't have to remember anything. And that's the truth: so less than three years, CDs and treasuries. If the duration you want to lock in is more than three years, then Multi-Year Guarantee Annuities have historically provided the highest contractual guarantee yield.

So, if you wanted to do a ladder of the best-fixed rates and you wanted to do a one-year, two-year, or let's say a six-month, one-year, two-year, three-year, four-year, five-year, then you do CDs or treasury CDs or treasury CDs or treasuries. Then, at the three-year mark, MYGA, MYGA, MYGA. So, just remember that. These are all CD-type products. The difference is, and the reason you have never heard of MYGAs until now, is that the commissions built into these annuities, and all annuity commissions are built in, on MYGAs are very, very, very low. So, you're never going to get the invitation in the mail to the Bad Chicken Dinner seminar or the Expensive Steak Dinner seminar, and Johnny Agent or Joanne Agent's up there saying, "You need to look at MYGAs." They're not going to do that because they want to sell you a higher commission product instead of that lower commission product, which, oh, by the way, is better for you, and you can get them in a shorter duration.

You've Won the Game

So, when people say annuities versus CDs, throw the word annuity out because that word is not all-encompassing. You have to specifically talk about the type of annuity to compare with the CD, and that's a Multi-Year Guarantee Annuity versus a CD. Both work. I encourage you to buy both when you want to protect the principal and peel off interest. Combine that with treasuries, and you've won the game. You don't have to play anymore. You no longer have to play the market game because you can protect the principal. You don't have to pay any fees, and you get a contractually guaranteed interest rate for a specific period of time that you choose. Now, the good news is at my site, you can see a live feed of the best MYGA, Multi-Year Guarantee Annuity, CD type annuity rates for your specific state, and you can filter it by duration. It's a live feed. It happens all the time. You can see if you can take the interest out, see the details of those MYGAs, and then schedule a call with us, and we'll walk you through it.

You can also download my MYGA owner's manual for free by clicking this link. That, entirely in detail, explains the product. I mean, you can't ask for more than that, right? MYGAs versus CDs. Both are good choices. Both work. Both protect the principal. And with that, I think I have tied it up in a nice little bow. My name is Stan The Annuity Man. I'll see you next time on the Stan The Annuity Man blog.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.

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