Annuity vs. CD: Which Is Right for Your Savings?

When retirees look for a safe place to grow money without stock-market risk, two options come up most: certificates of deposit (CDs) and fixed annuities. They share a goal — principal protection — but the way they handle taxes, growth, and access is quite different.

The core differences

• Backing: CDs are FDIC insured up to applicable limits. Annuities are not FDIC insured; their guarantees rely on the claims-paying ability of the issuing insurance company and state guaranty associations.
• Taxes: CD interest is generally taxed each year. Fixed annuity growth is tax-deferred until you withdraw it, which can help if you don't need the money now.
• Term and access: CDs typically run months to a few years. Annuities often have longer surrender periods, with penalties for early withdrawal beyond the free amount.
• Income options: annuities can be converted into guaranteed lifetime income — something a CD cannot do.

Which one fits?

A CD may suit money you'll need in the near term and want fully liquid and FDIC insured. A fixed or fixed indexed annuity may suit longer-term money where tax deferral, potentially higher crediting, or future lifetime income matters more than short-term access.

Many retirees use both, for different jobs. Tim Hartle can compare current annuity rates against CD alternatives for your situation, with no cost and no obligation, so you can decide what's right for each dollar.

This article is for general educational purposes only and is not financial, tax, or legal advice. Rules and product features vary by situation and by state. Please consult a qualified advisor about your own circumstances. Any annuity guarantees discussed here are subject to the financial strength and claims-paying ability of the issuing insurance company. Annuities are not FDIC insured and are not bank guaranteed.