MYGAs vs. CDs: Pros and Cons of Each
When you’re looking for ways to protect your savings and earn a predictable return, it’s natural to compare Multi-Year Guaranteed Annuities (MYGAs) and Certificates of Deposit (CDs). Both offer stability and guaranteed interest, but they work differently and may support your financial goals in different ways. Understanding how each option functions—and the trade-offs involved—can help you make a confident, informed decision about your long-term plans.
What Is a CD?
A Certificate of Deposit (CD) is a savings product offered by banks and credit unions. CDs provide a fixed interest rate for a set period and are typically insured by the FDIC or NCUA up to applicable limits. In exchange for this guaranteed rate, you agree to leave your money in the CD for the full term unless you are willing to pay an early withdrawal penalty.
Common features of CDs include:
- Fixed interest rate for a specific period
- FDIC or NCUA insurance (up to applicable limits)
- Early withdrawal penalties
- Interest taxable annually
CDs are often used for short- to medium-term savings goals or as a low-risk place to store cash you may need in the near future.
If you’re comparing CDs with other conservative savings tools, you may also like:
▸ Pros and Cons of Multi-Year Guaranteed Annuities (MYGAs)
What Is a MYGA?
A Multi-Year Guaranteed Annuity (MYGA) is a type of fixed annuity that offers a guaranteed interest rate for a set number of years—similar to a CD, but generally structured for long-term retirement planning. MYGAs are issued by insurance companies, not banks, and feature tax-deferred growth, which can be valuable for individuals who don’t need immediate access to their savings.
Key features of MYGAs include:
- Guaranteed interest rate for a multi-year period
- Tax-deferred growth
- Generally allow limited annual withdrawals without surrender charges
- Option to convert the contract to income in the future
- Potential surrender charges for early withdrawals
- Not FDIC-insured; backed by the financial strength of the issuing insurer
For a deeper look at what makes MYGAs unique:
▸ What Is a Multi-Year Guaranteed Annuity (MYGA)?
How MYGAs and CDs Are Similar
Both MYGAs and CDs appeal to savers who value stability, protection, and predictability. They typically offer:
- Guaranteed interest rates for a defined period
- Predictable growth
- Low exposure to market volatility
The primary differences arise in how each product is structured, taxed, and used within a long-term financial plan.
To understand how annuities work more broadly:
▸ Annuities Guide: Types, Benefits, and How They Work
How MYGAs and CDs Differ
1. Tax Treatment
- CDs: Interest is taxed annually—even if you do not withdraw it.
- MYGAs: Interest grows tax-deferred until you withdraw funds, allowing earnings to compound more efficiently. Earnings are generally taxed at ordinary income tax rates.
2. Access to Funds
- CDs: Early withdrawals typically trigger bank penalties.
- MYGAs: Withdrawals during the surrender period may incur surrender charges, though many MYGAs offer limited annual penalty-free withdrawals.
3. Purpose and Use
- CDs: Often used for short-term savings or liquidity needs.
- MYGAs: Generally designed for retirement-focused growth and long-term planning.
4. Guarantees and Oversight
- CDs: Insured by the FDIC or NCUA (within policy limits).
- MYGAs: Backed by the financial strength and claims-paying ability of the insurer and are not bank-guaranteed or federally insured.
For more on Oceanview’s financial strength:
▸ Oceanview Ratings & Financial Strength
Pros and Cons of MYGAs and CDs
| Feature | MYGAs | CDs |
| Guaranteed Interest | Yes, multi-year | Yes, fixed term |
| Tax Treatment | Tax-deferred | Taxed annually |
| Ideal Time Horizon | Medium to long-term | Short to medium-term |
| Liquidity | Limited; may include penalty-free options | Limited; early withdrawal penalties |
| Insurance/Protection | Backed by insurer strength | FDIC/NCUA insured (limits apply) |
To explore MYGAs in more detail:
▸ Pros and Cons of Multi-Year Guaranteed Annuities (MYGAs)
When a CD Might Make Sense
A CD may be a good fit if you:
- You have a shorter time horizon for the cash to be invested
- Want FDIC or NCUA insurance
- Prefer simple access through your bank
- Expect to use the funds sooner rather than later
CDs can also be useful for laddering strategies that provide predictable near-term returns.
When a MYGA Might Make Sense
A MYGA could be appropriate if you:
- Want guaranteed growth for several years
- Prefer tax-deferred accumulation
- Are planning for long-term retirement goals
- Don’t need immediate access to the full amount
- Value the option to convert savings into income later
Finding the Right Fit for Your Needs
Both CDs and MYGAs offer reliable, guaranteed growth—but the better choice depends on your time horizon, tax situation, and financial goals. A financial professional can help you determine which option may be appropriate within your long-term retirement strategy.
Why Oceanview Life
At Oceanview Life and Annuity Company, we’re committed to helping individuals approach retirement with clarity, confidence, and peace of mind. Our focus is on delivering straightforward, competitive retirement solutions designed to offer stability, transparency, and long-term value.
What sets Oceanview apart:
- Financial Strength You Can Rely On: Rated A (Excellent) by A.M. Best.
▸ See Our Financial Ratings - Transparent, Easy-to-Understand Products: Designed to be simple and supportive.
▸ Explore Oceanview Annuity Products - Consistent, Competitive Value: Competitive rates with clearly defined renewal practices.
- A Service-First Mindset: We partner closely with financial professionals to help simplify key decisions.
At Oceanview Life, our purpose is simple: to help you navigate retirement with security, simplicity, and support—every step of the way.
Disclaimers
Guarantees are based on the financial strength of the issuing carrier. The multi-year guarantee annuity product with form number IIC19 OLA SPDA, or variations of such, are issued by Oceanview Life and Annuity Company (d/b/a Oceanview Life and Annuity Insurance Company in California; NAIC# 68446). May not be available in all states. Not available in the state of New York or Vermont. Policy form numbers and provisions may vary. Rates are guaranteed depending on the guarantee period selected at policy issue.
OCEANVIEW ANNUITIES ARE PRODUCTS OF THE INSURANCE INDUSTRY AND NOT GUARANTEED BY ANY BANK NOR INSURED BY THE FDIC OR NCUA/NCUSIF OR ANY OTHER FEDERAL GOVERNMENTAL AGENCY. MAY LOSE VALUE. NO BANK/CREDIT UNION GUARANTEE. NOT A DEPOSIT. MAY ONLY BE OFFERED BY A LICENSED INSURANCE AGENT. GUARANTEES ARE SUBJECT TO THE CLAIM PAYING ABILITY OF THE ISSUING INSURANCE COMPANY.
Annuities issued by Oceanview Life and Annuity Company, 1331 17th Street, Suite 1050, Denver, CO 80202. In California, doing business as Oceanview Life and Annuity Insurance Company www.oceanviewlife.com.
Annuities are generally designed as long-term retirement solutions and have certain limitations. They are generally not intended to replace emergency funds, serve as income for day-to-day expenses, or support short-term savings goals. Please review the contract for full details.
A.M. Best Rating as of December 11, 2024, is subject to change. A (Excellent) rating is third highest of fifteen possible rating classes for financial strength. The outlook assigned to these Credit Ratings is stable.
This material is a general description intended for general public, educational use. Oceanview Life and Annuity Company is not providing investment advice for any individual or in any individual situation, and therefore nothing in this correspondence should be read as such.
Neither Oceanview Life and Annuity Company nor any of its representatives may provide tax or legal advice.
Withdrawals in excess of any Free Partial Withdrawal amounts are subject to a Surrender Charge and Market Value Adjustment (MVA). The MVA may have the effect of increasing or decreasing the Surrender Value of the withdrawal depending on the market interest rate changes.
The IRS may impose a penalty for withdrawals prior to age 59 ½.
Contracts purchased in an IRA or other tax-qualified plan provide no additional tax-deferral benefit, since they are already afforded tax-deferred status. All annuity features, risks, limitations, and costs should be considered prior to purchasing an annuity within a tax-qualified retirement plan. For non-qualified annuities, tax deferral is not available to corporations and certain other entities.
While care was taken in compiling this information, the Company reserves the right to correct any typographical errors that may exist.
Rates, renewal caps, and declared interest rates, will always follow contract provisions relative to minimums and maximums stated. Oceanview determines, at its discretion, the rates, renewal caps and, declared interest rates above the contractual minimums that are guaranteed.