Fixed Annuities: Guaranteed Rates and How They Compare With Bank CDs

A fixed-rate annuity can provide a contractually stated rate for an agreed period without directly depending on daily stock-market movements. It differs from a bank certificate of deposit (CD) in the source of guarantees, access to money and taxation. Compare these features, not just rates.

1. What Is a Fixed-Rate Annuity?

A fixed deferred annuity is an insurance contract. A multi-year guaranteed annuity (MYGA) typically guarantees one rate for a stated number of years. The insurer credits interest under the contract; the renewal rate afterward can differ. A fixed annuity is not a bank deposit and does not automatically provide lifetime income. Accumulation, withdrawal and lifetime income are separate decisions. See Investor.gov's annuity overview.

2. Historical Rate Examples

The following market references were checked October 27, 2026. They are not current personal quotes, and products have different terms. Rates and availability can change; confirm the issuing insurer, state, age, premium, guarantee period and actual crediting terms before applying.

A longer term is not necessarily higher. One checked five-year 6.30% quote required at least $100,000 and one six-year 6.10% quote required at least $70,000; those requirements do not apply to every product. The table alone does not establish a contract's guaranteed rate or term.

3. A $100,000 Compounding Illustration

Assume $100,000 earns 6.30% annually for five years, interest compounds annually and remains invested, no withdrawals occur, and taxes or other effects are excluded. The mathematical result is $100,000 × (1 + 6.30%)⁵ ≈ $135,727: approximately $35,727 interest, or 35.73% total over five years, not 35.73% per year. This is not a guaranteed current offer or an after-tax withdrawal value. Actual contract crediting, withdrawals, charges and taxes can change the result.

4. Bank CD Versus Fixed Annuity

Brokered or callable CDs can work differently. See Investor.gov's CD guide.

5. How Do Their Safety Protections Differ?

At an FDIC-insured bank, eligible deposits generally receive up to $250,000 per depositor, per insured bank, per ownership category, including eligible accrued interest. Accounts in the same bank and category are aggregated; opening more CDs does not automatically multiply coverage. See FDIC insurance rules.

Annuities are not FDIC-insured, even when purchased through a bank. Guarantees are obligations of the actual issuing insurer and depend on its financial strength and claims-paying ability. A guaranteed rate does not eliminate insurer credit risk. Evaluate both the guarantor and when funds may be needed.

6. Potential Advantages

A rate guaranteed for the whole term can provide predictability; if rates fall, the contract rate generally remains for that period. The term may match a medium-term goal, provided emergency funds remain available. Earnings in a nonqualified deferred annuity generally grow tax-deferred. Deferral is not tax exemption and does not guarantee lower eventual tax.

7. Limitations

Withdrawals above the permitted free amount during the surrender period can incur charges. Some contracts have a positive or negative market value adjustment (MVA), so account value may differ from the amount available on surrender. Free withdrawal terms vary and should not be assumed to be 10%. A locked rate may miss future increases, and inflation can erode purchasing power. Check the guarantee period, surrender schedule, maturity window, automatic renewal and any new restrictions separately. See the NAIC fixed annuity guide.

8. Tax Considerations

Before annuitization, nonqualified annuity withdrawals generally distribute earnings first, taxed as ordinary income. Taxable distributions before age 59½ may incur an additional 10% federal tax unless an exception applies; that is separate from insurer surrender charges. CD interest in a taxable account generally must be reported under applicable rules. An annuity in an IRA does not create a second layer of tax deferral. Consult IRS Publication 575 and a qualified tax adviser.

9. Who Might Consider One?

It may suit someone with adequate emergency savings, a clear medium- or long-term use for part of their money, and an ability to accept liquidity restrictions and insurer risk. Living expenses, business working capital, near-term medical, tuition or home-purchase funds and money needed before age 59½ require particular caution. Do not commit all liquid assets merely for a higher quote.

Watch AAM's fixed annuity explanation.

10. Questions Before Purchasing

Ask how long the rate is guaranteed, how it compounds, whether the guarantee and surrender periods match, the net early-withdrawal amount and MVA, free-withdrawal terms, maturity and renewal options, the issuing insurer's financial strength, and whether the tax treatment and timing fit your needs. Financial ratings help assessment but are not promises of future performance.

General education only, not individualized insurance, investment or tax advice. Historical quotes are examples; actual rates, guarantees and fees depend on the issued contract. Annuities are not bank deposits or FDIC insured. Guarantees depend on the insurer's claims-paying ability. The image is an AI-generated illustration.