Annuity vs CD: Which Pays More in Retirement (2026)

Related Articles What Is An Annuity | Annuity Guide Does A Retirement Annuity Make Sense For Your Golden Years Annuity Options Explained | Annuity Guide Make Retirement Safe Again | Annuity Guide By Brent Meyer — SafeMoney.com Founder & Editor Reviewed by Licensed Financial Professionals  |  SafeMoney.com — Trusted Since 2011  |  Updated Regularly Quick Answer: Fixed annuities — specifically multi-year guaranteed annuities (MYGAs) — typically pay higher rates than bank CDs for equivalent terms, offer tax-deferred growth, and fully protect your principal. The trade-off is reduced liquidity during the surrender period and no FDIC coverage. For retirement savings you won't need for three to ten years, a MYGA often delivers meaningfully more income than a CD. The Core Question: How Much More Does an Annuity Pay? When retirees compare annuities and CDs, the income difference is usually the first thing they want to know. In 2026, the gap is real and significant. A competitive 5-year CD from an online bank yields approximately 4.75% to 5.0%. A top-rated 5-year MYGA from an A-rated insurance carrier yields 6.0% to 6.3%. On a $100,000 deposit, that rate difference produces $104 to $129 more per month — every month — for the full five years. On $250,000, the same rate difference adds $260 to $323 more per month. Over five years, that compounds to $15,600 to $19,380 in additional income from the same principal — without taking any market risk. That is not a trivial difference for a retiree building a predictable income floor. What Makes a Fixed Annuity Different From a CD? Both products share the same basic structure: you commit a lump sum for a fixed term and receive a guaranteed interest rate. Your principal is fully protected throughout. At the end of the term, you receive everything back. The experience looks and feels similar. But several important differences affect the decision. The Issuer and the Guarantee A CD is issued by a bank or credit union and insured by the FDIC up to $250,000 per depositor per institution. The FDIC guarantee is backed by the full faith and credit of the U.S. government — an unconditional backstop. A fixed annuity is issued by an insurance company. Your guarantee comes from the carrier's financial strength and each state's insurance guaranty association, which typically protects up to $250,000 per insurer. For amounts within those limits and with carriers rated A or better by A.M. Best, both products provide ro