Learn About Gainbridge’s CD-Like Annuity (up to 5.20% APY*)
When depositors assess their options online to invest savings, it’s not uncommon to find annual percentage yields (APYs) for annuities at higher rates than those offered by traditional banking products, such as certificates of deposit (CDs).
Even though both CDs and annuities have disclosures and fine print, CDs are quite familiar to most savers, who know to learn the APY, penalty, tax, and maturity implications of investing in a certificate.
Annuity is an umbrella term that covers a wide range of products designed for different goals. When comparing CDs to annuities, the most common match is a Multi-Year Guaranteed Annuity (MYGA) — a fixed annuity that provides a predictable rate for a set term, much like how CDs function at banks or credit unions.
With MYGAs appearing more frequently alongside CDs in rate searches, and with new innovations, many savers are starting to wonder: How do MYGAs really compare to CDs, and what should I know before considering one?
What is an annuity?
Let’s start with the basics. An annuity is a contract with an insurance company. You give the insurer your money (either once or over a period of time) and in return, they provide you a stream of payments. That income stream can begin right away (immediate annuities), or it can start far in the future (deferred annuities). Annuities might be described as a do-it-yourself pension because they can provide a predictable and stable income stream, usually after years of paying into the investment.
As mentioned, the MYGA is the most comparable to a Certificate of Deposit (CD). MYGAs are designed to protect your principle while offering competitive rates. The following chart focuses on how the two products align and differ.
Side-by-side: How CDs and MYGAs compare
| Category | CD (Certificate of Deposit) | MYGA (Multi-Year Guaranteed Annuity) |
| Issuer | Traditional banks, online banks, credit unions. | Insurance companies. |
| Rates | Fixed for the term of the CD. Vary based on term length, deposit amount, and institution type. | MYGAs are fixed for the entire term length, similar to a CD, whereas other annuities may reset the rate after the first year or fluctuate with market performance, depending on the annuity product. |
| Term/Maturity | Commonly 3 months to 5 years. | Commonly 3 years to 10 years. |
| Penalty | Early withdrawal penalty typically equals 90 to 180 days of interest, depending on the term. Generally, the longer the CD term, the higher the penalty. | Most MYGAs provide a free withdrawal amount (generally up to 10% of the value annually), and if you withdraw more than that, you are charged an early withdrawal penalty. The penalty often starts around 7% of your value and decreases annually through your contract term, which is usually 3 to 10 years after purchase (depending on the term you selected), eventually reaching 0%. There are also IRS tax penalties if you withdraw your money before age 59 ½ unless you purchase a non-tax deferred annuity. |
| Insurer | FDIC- or NCUA-insured, up to $250,000 per depositor, per institution (additional coverage can be garnered based on how accounts are structured, as coverage varies by account ownership category). You can determine your specific coverage using the FDIC or NCUA calculators. | Backed by the issuing insurance company. Since annuities are backed by the insurer’s financial strength, be sure to review the insurer’s financial rating before investing. |
| Taxes | Interest is considered taxable income in the year that you earn it. IRA CDs are available at many financial institutions too, which include the tax benefits of IRAs and come with Required Minimum Distributions (RMDs). | Some MYGAs offer tax deferral where taxes are due at the time of withdrawal, while non-tax deferred annuities incur tax liabilities annually as interest is earned. |
Source: Annuity.org
Choosing the best fit
Short-term savings
Are CDs a better fit than MYGAs? It depends on the purpose of the savings.
Near-term needs, such as a down payment on a home or other major purchase, may fit better with CD maturities because of the extensive surrender periods common for annuities. As Annuity.org explains, surrender periods can be as short as three years, but they still create a significant deterrent to “selling or withdrawing money from an annuity before it matures.”
While CDs may have early withdrawal penalties, they do not have the duration or scope found among annuities. When savers need to spend their savings within three years, they are likely to find CDs’ penalty structures more practical.
Retirement and long-term savings
When it comes to investing for longer-term reasons, such as retirement, MYGAs can be a highly attractive alternative.
When using CDs, for example, savers must compare rates every time a certificate reaches maturity and therefore are taking on the risk/reward that rates have decreased or increased. In contrast, funds placed into annuities are typically “locked-in” for a more extended period, which creates more predictable returns without active management from year to year. However, with an annuity, you could be locked in for a longer period of time at a lower rate should rates go up.
As Wade Pfau, Ph.D., CFA, Professor of Retirement Income at The American College of Financial Services, explains: “Any form of risk-pooling is better than none.” He uses that principle to highlight why annuitization — converting capital into guaranteed lifetime income — can provide a more stable foundation than relying only on bonds in retirement (Retirement Income Journal).
Fixed immediate annuities are designed to deliver steady income shortly after purchase—typically within 30 days and always within the first year. These contracts can provide predictable, long-term income with relatively low risk.
Drew Eddinger, Director of Consumer Deposits Marketing & Strategy at Gainbridge®, highlights this benefit for savers as well:
“Guaranteed income annuities can help provide a financial safety net, which can reduce stress and allow retirees to use their remaining savings more confidently. When essential expenses are covered, retirees can feel comfortable planning for lifestyle goals, travel, or supporting family. Guaranteed income annuities provide this certainty because the payments are predictable and ongoing, helping savers integrate them into their overall financial plan.”
Innovations in Annuities
In addition to each element described in the comparison above, savers should check that they understand the fees associated with opening and maintaining an annuity.
Annuities are often used as part of retirement planning, but they can include a variety of fees and expenses, such as surrender charges, mortality and expense risk charges, and administrative fees. Some contracts may also include additional costs for optional features or riders, like stepped-up death benefits, guaranteed income or withdrawal benefits, long-term care coverage, or principal protection.
To simplify annuities for consumers, companies like Gainbridge® have brought direct-to-consumer MYGA products to market, such as its FastBreakTM Annuity, which allows rates of up to 5.20% APY*. This new distribution source for annuities can benefit savers by eliminating intermediary companies that tag on additional hidden fees and commissions. The FastBreakTM Annuity has no annual fees or sales charges, and unlike most traditional MYGAs, FastBreakTM is a “non-tax-deferred annuity.” This means you pay taxes on earnings in the year they are earned like a CD, rather than deferring them until withdrawal, but it comes with improved liquidity options. “You can withdraw up to 10% of your initial premium in the first year or, starting in the second year, you can withdraw up to 10% of the contract anniversary’s contract value,” Eddinger says.
Importantly, the innovation in the FastBreakTM Annuity allows you to withdraw money before 59.5 years old while avoiding the 10% penalty from the IRS on the taxable portion of the withdrawal amount (on top of income tax on the earnings) that is typical of other annuities.
Bottom Line
CDs and annuities are built for different jobs and can be a nice complement to each other in your savings portfolio. Use CDs for short- to medium-term savings you may need within three years. Consider annuities for longer-term goals or to secure future income, keeping in mind the longer time commitments, different tax treatment, and differences in how your investment is insured.
The APYs on some annuities may look higher than CD rates, but don’t assume it’s an apples-to-apples comparison. Be sure to research liquidity options, taxes, fees, and your goals before selecting an investment product.
If you’re looking for annuities that behave more like a CD, explore Gainbridge® options here. CD Valet also offers listings from banks and credit unions across the country for longer-term CDs here.
FAQ
Q: I see annuities advertised offering high APYs. Am I likely to actually earn this rate after all the fine print?
Short answer: Not always—fees and tax treatment can reduce your actual earnings.
Fees (such as surrender charges or administrative costs) are usually subtracted from the income your annuity generates, lowering what you receive. Generally, the more complex the annuity, the more impact fees have. Taxes also matter, so be sure to evaluate both when comparing products.
Q: Are salespeople paid a commission for selling me an annuity contract?
Short answer: Most of the time the answer is yes, as most agents selling annuities earn commissions, though amounts vary. With newer products like the Gainbridge® FastBreakTM Annuity, which is a direct-to-consumer product, there are no sales commissions.
It’s common for the broker or agent to receive a commission, usually between 1% and 8% depending on the annuity type. While you do not directly pay the commission, incentives may affect which products are recommended. It’s appropriate to ask questions so you understand how your agent is compensated.
Sources:
- Annuity.org – “Taxation of Annuities”
- Annuity.org – “Withdrawing from an Annuity”
- Annuity.org – “Surrendering Annuities”
- Seattle Bank – “Understanding Tax Implications of Certificates of Deposit”
- Wade D. Pfau, Ph.D., CFA – Retirement Researcher and Retirement Income Journal Interview
- Drew Eddinger, Director of Consumer Deposits Marketing & Strategy at Gainbridge, and Gainbridge FAQ
* Annual Percentage Yield (APY) as of 12/02/25 and subject to change. The annuities offered on the Gainbridge® platform and/or certain features may not be available in all states (currently licensed in all states except New York).
