Determine Your Best Savings Strategy Before You Buy.
Use our CD vs. Savings Account Calculator to compare the benefits of CDs, high-yield savings accounts, and money market accounts. Decide whether a long-term or short-term savings plan best suits your goals. Shop for the best plan online with The Annuity Expert. Weโll guide you through comparing options, helping you maximize returns, and choosing a no-obligation plan thatโs right for you.
What Is a Certificate of Deposit (CD)?
A CD is a time deposit issued by a bank or credit union. You commit to leaving your money in the account for a fixed term, usually 3 months to 5 years, in exchange for a guaranteed interest rate.
- Interest is fixed for the entire term.
- Early withdrawals are penalized, typically resulting in the forfeiture of part or all of the interest.
- FDIC-insured up to $250,000 per depositor, per bank
What Happens After the CD Matures?
At the end of the term, the CD matures, and you typically have a 7โ10 day grace period to withdraw or reinvest your funds. If you do nothing, the bank will automatically roll the balance into a new CDโoften at a lower interest rate and a new term.
You must act during the grace period to take control of the money or move it to a better-paying option.
Pros
- Predictable, fixed returns
- No market risk
- Government-backed insurance
Cons
- Locked-up money
- Missed rate increases
- Maturity rollovers may pay lower rates
Who Should Use CDs?
- Savers who can commit to a specific time horizon
- Retirees protecting near-term cash
- People are saving for short-term needs like a house or a car
Who Should Avoid CDs?
- People who want liquidity
- Those saving for retirement
- Anyone trying to beat inflation
What Is a Savings Account?
A savings account is a liquid bank account that pays variable interest. Itโs ideal for storing money you may need on short notice.
- Full access to funds anytime
- Variable interest rates (can increase or decrease)
- FDIC-insured up to $250,000
What Happens Over Time?
The account remains open indefinitely. If interest rates drop, your earnings decrease with no notice. If rates rise, your bank may or may not pass along the increase. The only way to benefit is to move funds to higher-paying savings accounts or CDs actively.
Pros
- Daily access to cash
- No penalty for withdrawals
- Stable and safe for emergencies
Cons
- Low interest compared to CDs or annuities
- The bank can change rates at any time
- Poor long-term growth potential
Who Should Use Savings Accounts?
- Those building emergency funds
- People who need cash on hand
- Savers looking for simplicity
Who Should Avoid Them?
- Investors who want predictable or competitive growth
- Retirees needing income
- Those with large cash balances earn very little
Why Compare With Multi-Year Guaranteed Annuities (MYGAs)?
A MYGA is an annuity that works like a CD but is issued by an insurance company. It guarantees a fixed interest rate for 2 to 10 years and offers tax-deferred growth in non-qualified accounts.
What Happens After the Term Ends?
At the end of a MYGA term, youโll have several options:
- Withdraw your funds, including principal and interest
- Renew into another MYGA (possibly at a new rate and term)
- Transfer into a fixed indexed annuity (FIA) to continue tax deferral and add lifetime income options.
- Annuitize (not recommended) or start a guaranteed lifetime income with a GLWB rider if added
You typically have a 30-day window to act before the insurance company auto-renews the contract into a new termโoften with lower rates and no liquidity.
Pros
- Higher interest rates than CDs
- Tax-deferred growth (non-qualified accounts)
- Annual penalty-free withdrawals (usually 10%)
- Retirement income options through optional riders
Cons
- Surrender penalties if withdrawn early
- Not FDIC-insuredโbacked by the insurer and state guaranty association
- Limited liquidity unless using penalty-free provision
Who Should Use a MYGA?
- Savers who donโt need full liquidity
- Those wanting higher, fixed returns
- People deferring taxes on non-qualified funds
- Pre-retirees preparing to turn assets into income
Who Should Avoid MYGAs?
- People needing frequent or full access to funds
- Those with very short time horizons
- People who only want FDIC-backed products
What Happens at Death?
- CDs and savings accounts: Pass to named beneficiaries or the estate with no penalties
- MYGAs: Pass to beneficiaries as a lump sum. If you added spousal continuation, the spouse can continue the contract tax-deferred
- Some MYGAs and FIAs offer enhanced death benefits that increase the payout for heirs
What Types of Accounts Can Fund Each?
| Product | Fund with Non-Qualified Money | Fund with Traditional IRA, Roth IRA, or 401(k) |
|---|---|---|
| Savings Account | โ Yes | โ No |
| CD | โ Yes | โ (Unless in an IRA CD) |
| MYGA | โ Yes | โ Yes (IRA, Roth IRA, 401(k) rollover) |
Final Comparison: CD vs. Savings vs. MYGA
| Feature | Savings Account | CD | MYGA |
|---|---|---|---|
| Liquidity | Anytime | Locked | Limited (10% free withdrawals) |
| Rate | Variable | Fixed | Fixed (usually higher than CDs) |
| Tax-Deferred Growth | No | No | Yes (non-qualified) |
| Penalty-Free Access | Yes | No | Yes (limited annually) |
| Guaranteed Income Option | No | No | Yes (with GLWB rider) |
| Death Benefit | Lump Sum | Lump Sum | Lump Sum or continuation |
| After Term Ends | Continues with rate changes | Auto-renews or matures | Withdraw, renew, roll into FIA, or start income |
Our Favorite Rates To Grow Your Money
These are our preferred accounts because the savings, money market, and CDs only require $1 to open. This allows you to spread out risk in case a bank or credit union closes in the future. The fixed annuity offers one of the highest interest rates, provides penalty-free annual withdrawals for liquidity, and typically has a longer term than a CD.
| Term | Savings Account | Institution | APY |
|---|---|---|---|
| N/A | Money Market Account | SkyOne Federal Credit Union | 4.16% |
| N/A | Savings Account | Northpointe Bank | 4.30% |
| 6 Months | CD | Merrick Bank | 4.16% |
| 12 Months | CD | NexBank | 4.55% |
| 2 Years | Fixed Annuity | Oceanview Harbourview MYGA | 5.15% |
| 5 Years | Fixed Annuity | Wichita National | 6.40% |
Disclaimer: This is a comparison review. The Annuity Expert is not associated with a bank or credit union. We aim to help you find the highest interest rates for your savings. We may receive a small referral fee if you purchase something using a link in this guide.
Additional Insurance Products That Solve Related Problems
- Fixed Indexed Annuities (FIAs): Offer a fixed rate or index-linked returns with no loss of principal, plus income and death benefit options.
- Deferred Income Annuities (DIAs): Offer higher payouts later in life but no access to money before the start date.
- Whole Life Insurance: Offers guaranteed cash value and a death benefitโideal for estate planning and asset replacement.
- Long-Term Care Annuities: Combine asset protection and care coverage for future health needs.
Bottom Line
- Use a savings account for emergencies and short-term flexibility.
- Use a CD for short-term, fixed growthโbut watch your renewal options closely.
- Use a MYGA if you want a higher fixed rate, tax deferral, and the flexibility to transition into guaranteed income.
Donโt let your money sit idle or roll into a lower rate. Contact The Annuity Expert for free quotes to compare CDs, MYGAs, and fixed indexed annuities. Weโll help you find the best strategy to grow and protect your money, based on your timeline and goals.
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