The Difference Between Fixed Annuity and CDs

Shawn Plummer

CEO, The Annuity Expert

In this guide, I’ll go over the primary differences between a fixed annuity and CD rates so you can make the best decision while shopping for the best savings plans.

We’ll Answer The Following Questions:

  • Are Annuities FDIC Insured?
  • Are Annuities Guaranteed?
  • Who Guarantees Annuities?
  • Are annuities like CDs?

What is a CD and a Fixed Annuity?

What is a Certificate of Deposit (CD)?

A Certificate of Deposit (CD) is a savings product sold by banks and credit unions, offering a fixed interest rate (set by the bank) to customers wanting to earn a little more interest than personal savings accounts provide. Each CD offers a term ranging from 6 months to 10 years in length.

What is a Fixed Annuity?

A Fixed Annuity is a retirement savings plan sold by an insurance company, offering a fixed interest rate (set by the insurance company) to customers wanting to earn more interest than a Certificate of Deposit (CD). Each fixed annuity has a term ranging from 2 years to 20 years in length.

Similarities and Differences

  • Both are Savings Plans.
  • Both earn a guaranteed fixed amount of interest.
  • Both offer safety of principal.
  • Both offer access to the principal, both with penalties and without penalties.
  • Both can avoid probate if set up correctly.
  • Fixed Annuities offer tax-deferred growth. CDs do not.
  • Fixed Annuities can provide a guaranteed lifetime income.

Certificates of Deposit vs. Fixed Annuity

The Top Fixed Annuities

Fixed annuities offer a guaranteed return for a set amount of years, similar to a CD. Guaranteed crediting rates for the terms below:

  • 2 YEAR TERM: 2.15%
  • 3 YEAR TERM: 2.60%
  • 4 YEAR TERM: 2.60%
  • 5 YEAR TERM: 3.05%
  • 7 YEAR TERM: 3.25%
  • Grow your money as fast as possible
  • Principal protection
  • Interest rate is locked for the term you select
  • Tax deferred growth
  • Withdraw annually without penalty
  • Lump sum death benefits
  • Accepts cash, 401(k), and IRA Funds

What’s The Difference Between a Fixed Annuity and CD?

FeatureFixed AnnuityCD
Who OffersInsurance CompanyBanks
Premium Amounts$2,500 to $1 Million$500 – No Maximum
Terms2 Years to 20 Years3 Months to 7 Years
Guaranteed Interest RatesUp to 3.25%Up to 1.25%
Principal ProtectionYesYes
Can Lose Money?NoNo
Liquid After Term100%100%
How Are Gains Taxed?Tax-DeferredTaxed Annually
Annual LiquidityUp to 10% AnnuallyNo Liquidity
Who Protects My Money?Insurance Company/SGAFDIC
Accepts IRAYesNo
Accepts 401(k)YesNo
Death BenefitLump-SumLump-Sum

Are Annuities FDIC Insured?

Fixed annuities are not FDIC insured, but they have similar protections for your money. An annuity is an insurance policy guaranteed by the insurance company’s claims-paying ability. The insurance companies are members of the state insurance guarantee associations in each state where they do business. Each state insurance guarantee association protects consumers in the unlikely event that their insurance company fails and defaults on their obligations to their consumers (limits vary per state).

For example, Georgia insures up to $250,000 of the annuity’s cash value per insured life if the insurance company becomes insolvent and can not fulfill its obligations to the insured.

The Best CD Rates Today

3 Month CD Rates

Best 3-Month CD RatesRateTermMinimum
Spectrum Federal Credit Union0.50% APY3 Months$500.00
Service Credit Union0.40% APY3 Months$500.00
Chevron Federal Credit Union0.50% APY3 Months$500.00

6 Month CD Rates

Best 6-Month CD RatesRateTermMinimum
CommunityWide FCU0.70% APY6 Months$500.00
Lafayette Federal Credit Union 0.70% APY7 Months$500.00
Spectrum Federal Credit Union0.50% APY6 Months$500.00

1 Year CD Rates

Best 12 Month CD RatesRateTermMinimum
Lafayette Federal Credit Union 0.80% APY12 Months$5,000.00
CommunityWide FCU0.75% APY12 Months$1,000.00
Live Oak Credit Union0.75% APY12 Months$2,500.00

2 Year CD Rates

Best 2-Year CD RatesRateTermMinimum
Lafayette Federal Credit Union 0.80% APY24 Months$500.00
Live Oak Credit Union0.75% APY24 Months$2,500.00
SILAC Fixed Annuity2.15% APY24 Months$10,000.00
Oceanview Fixed Annuity1.80% APY24 Months$20,000.00

3 Year CD Rates

Best 3-Year CD RatesRateTermMinimum
First National Bank of America0.90% APY36 Months$1,000.00
Lafayette Federal Credit Union 1.00% APY36 Months$500.00
Canvas Annuity*2.60% APY36 Months$2,500.00

4 Year CD Rates

Best 4-Year CD RatesRateTermMinimum
First National Bank of America0.95% APY48 Months$1,000.00
Lafayette Federal Credit Union 1.15% APY48 Months$500.00
Hiway Federal Credit Union1.10% APY48 Months$25,000.00
Nassau Fixed Annuity2.50% APY48 Months$5,0000.00

5 Year CD Rates

Best 5-Year CD RatesRateTermMinimum
First National Bank of America 1.20% APY60 Months$1,000.00
Lafayette Federal Credit Union1.26% APY60 Months$500.00
Canvas Annuity*3.05% APY60 Months$2,500.00

The Best Fixed Annuity Rates Today

SILAC2 Years2.15%Allowed With Penalty
Canvas*3 Years2.60%10% Allowed Annually
Oceanview4 Years2.60%10% Allowed Annually
Canvas*5 Years3.05%10% Allowed Annually
Canvas*7 Years3.25%10% Allowed Annually

CD Rates Vs. Fixed Annuity Rates

$100,000 CD versus $100,000 Fixed Annuity

TermCD RateEarningsAnnuity RateEarnings
*Gross Earnings Before Taxes

Do I have to pay taxes on my interest?

  • CD: Interest earned from CD rates is taxed and paid annually as ordinary income unless the CD is set up as an IRA.
  • Fixed Annuity: The money in deferred annuities grows tax-deferred which means taxes are not reported until the policy owner takes a withdrawal from the account.

Federal Taxes

Now that you understand how CDs and fixed annuities are taxed, take the interest earned from the CD above, and subtract your tax bracket percentage. Federal tax rates range from 10% to 37%, depending on your income and how you file taxes annually (Single or Joint).

In the end, you’ll earn less than 1% on your CD.

State Taxes

In addition to federal income tax, you may have to report earnings from your CD to the state as “interest income.” State taxes can range from 0% to 7.25%.

How much liquidity do I have?

  • CD: Most CDs allow withdrawals, but with a penalty incurred.
  • Fixed Annuity: Most annuity contracts offer a specific percentage of the contract’s value that can be withdrawn annually without a penalty. For example, a fixed annuity may allow up to 10% to be withdrawn each year without any penalties.

Best CDs and Fixed Annuities for Liquidity

Canvas Flex FundAnnuity
First Republic Liquid CDCD
Guggenheim ProOptionAnnuity
Citizens Access Liquid CDCD

How is my money protected?

  • CD: Most CDs are insured up to $250,000 per CD, per bank or credit union by the FDIC.
  • Fixed Annuity: Annuities are insured by the issuing insurance company. The state insurance guaranty association protects the policyholders in case the insurance company closes permanently. Each state has a maximum dollar amount that will be insured.

Can I create an income stream?

Estate Planning

  • CD: Typically, if a designated beneficiary is assigned when purchasing a CD, that beneficiary can inherit the CD in a lump sum and avoid probate at the time of death.
  • Fixed Annuity: The same goes for a fixed annuity. If a designated beneficiary (other than the estate) is assigned ahead of time, that beneficiary can avoid probate at the time of death. Depending on the annuity contract, the death benefit can be distributed as a lump sum or a series of payments.


CD: A CD can be purchased in a matter of minutes at a local bank or credit union, which makes the process extremely easy and convenient.

Annuity: Typically, purchasing an annuity is not convenient because you have to purchase a contract from a licensed professional such as a financial advisor or an insurance agent. Some banks provide a financial professional that can sell you a fixed annuity as well.

The total annuity application process can take up to a few weeks to process, depending on where the funds are coming.

However, as time progresses, the convenience level of purchasing an annuity is improving.

For example, Canvas Annuity from Puritan Life Insurance Company of America* allows customers to purchase fixed annuities without a financial professional. Instead, the customer simply selects their annuity, fills out an application (which takes less than 10 minutes), and waits for the application to be approved. The total process time is under 48 hours.


CD rates offer a higher rate than a savings or checking account at a bank.

Fixed annuity rates offer a higher rate than a CD, even in banks like Wells Fargo, Bank of America, and State Farm.

Both offer the safety of the principal.

Both offer access to the principal.

Both can avoid probate if a designated beneficiary is selected ahead of time.

Annuities offer tax-deferred growth. Taxes are paid annually on CD interest rates.

CDs offer some liquidity with a possible penalty. Conversely, annuities offer some liquidity without penalties.

The FDIC insures the Certificate of Deposit. The issuing insurance company insures the annuity.

Which product is perfect for you?

Disclaimer: I may receive a small referral fee if you purchase something using a link in this article.

Why you can trust The Annuity Expert

At The Annuity Expert, we strive to help you make confident financial decisions regarding annuities. Content provided is created by an independent licensed financial professional.

The Annuity Expert is an online insurance agency that provides the widest variety of annuities in the United States. When you buy an annuity directly from us, we receive a predetermined commission from the insurance company (not you). While your annuity is active, clients are not charged any servicing or management fees. Learn more.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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