MYGA vs CD: Which Pays More After Taxes?
"Money can beget money, and its offspring can beget more." Benjamin Franklin
Your CD is the money you never worry about.
It sits at the bank, earns its rate, and comes due on a date you barely remember setting. When it matures, you sign a form, pick another term, and go back to your life. Safe money, handled.
Here's what that habit hides. The rate you accept at the counter, and the tax you pay every year on interest you can't touch without a penalty, can quietly cost you thousands over five years. Not because a CD is bad, but because nobody ever set it side by side with the alternative.
As of October 14, 2026, five-year MYGAs available in New Jersey pay up to 6.30%, and A-rated insurers pay about 6.00%, while the best five-year bank CDs pay about 5.00%. On $100,000, the right MYGA can leave you $5,000 or more after federal tax. But the highest rate isn't always the right one, and here's why.
A question at a networking event
I met Carol at a networking event here in New Jersey. Her CD was coming due, and she had been quietly wondering whether there was something better than another CD. Before long, she was asking me about annuities.
It's a good instinct, and it's the right question. Carol is a client now, and I've changed her name and a few details to protect her privacy. She ended up in a MYGA, here in New Jersey. How we got there is the useful part, because if your CD is coming due, you are standing exactly where she stood.
Three things decide it: the rate you can get from an insurer you trust, when the tax comes due, and whether you can reach the money when life rewrites the plan. Let's take them one at a time.
What a MYGA is, and why people keep money in CDs anyway
A CD is easy to like. You hand the bank a lump sum, the bank promises a fixed interest rate for a set term, and the FDIC stands behind it up to $250,000 per depositor, per bank, for each ownership category. Nothing to watch, nothing to manage.
A MYGA, short for multi-year guaranteed annuity, does the same job from a different kind of institution. You hand an insurance company a lump sum, and it guarantees a fixed rate for a set number of years, usually three, five, or seven, with no stock market anywhere in the picture. What changes is who stands behind the promise: the claims-paying ability of the issuing insurance company, not the FDIC.
So before any rate gets a second look, the first question is who will be holding your money for the next five years.
Today's rate board, side by side
Here's what the board looks like for anyone standing where Carol stood. Every number is dated, because rates move.
Highest five-year MYGA available in New Jersey: 6.30%, from an insurer rated A- by AM Best, with a $100,000 minimum (as of October 14, 2026).
Highest five-year MYGA with a $10,000 minimum: 6.25%, from an insurer rated B++ (as of October 14, 2026).
Five-year MYGA from A and A+ rated insurers: 6.00% (as of October 14, 2026).
Best five-year bank CD: 5.00% APY with a $10,000 minimum, per Bankrate (updated October 7 to 13, 2026).
National average five-year CD: 1.82% APY, per Bankrate (as of October 14, 2026).
Look at the distance between the top line and the bottom one. Some CDs are set to renew automatically at maturity, at whatever rate the bank is offering that day, and federal rules only require a notice 20 to 30 days ahead. Miss that window and a renewal at an average rate gives up a lot of ground.
One more note on terms. Plenty of savers keep CDs shorter than five years, and right now the best three-year CD pays 4.85% APY, per Bankrate. I've compared five years to five years so the math stays apples to apples. MYGAs come in three-year terms too.
Why can an insurer pay so much more? Insurers hold longer-term bonds against commitments that run for years, while a bank prices a CD against much shorter funding needs. A multi-year promise can earn a multi-year rate.
You'll notice the board includes the 6.30% and the 6.25%. I show the highest rate available in the state in every review, because a number that catches your eye deserves an honest look, not a bait-and-switch. Then it goes right beside the stronger insurers. B++ is AM Best's "Good" grade, while A and A+ are "Excellent" and "Superior," and you're choosing who will hold your savings for years.
The tax bill hiding in your 1099-INT
If you own a CD, a 1099-INT probably shows up every January, and it's easy to file without a second thought. That little form is the CD's quiet cost. The IRS treats interest as taxable in the year it becomes available to you, so each year a slice of your interest goes to taxes instead of staying put and compounding.
A MYGA bought with after-tax money works differently. The growth generally stays inside the contract, untaxed, until you take it out, and withdrawals come from earnings first, taxed as ordinary income. Deferral doesn't make the tax disappear. It lets you pick the year it comes due, ideally one when your income is lower. New Jersey adds its own layer, which I cover in how annuities are taxed in New Jersey. This is general education and is not tax or legal advice.
Running $100,000 through both
Here is the math on $100,000: five years, a 24% federal bracket, no state tax, the CD taxed every year and the MYGA taxed once at the end.
Average CD at 1.82%: about $107,110 after five years of annual tax.
Best CD at 5.00%: $127,628 before tax, about $120,500 after the annual tax.
A-rated MYGA at 6.00%: $133,823 at the end of the term. Tax on the $33,823 gain is $8,117, which leaves about $125,705.
B++ MYGA at 6.25%: $135,408 at the end of the term. Tax on the gain is $8,498, which leaves about $126,910.
Against the best CD, a MYGA leaves $5,200 to $6,400 more after federal tax. Against the average CD, the gap is about $18,600.
Then comes the part the ads leave out. Almost all of that edge comes from the rate. Tax deferral adds only about $729 to $794 at a 24% bracket. Once you see that, the question changes from CD or MYGA to which MYGA. Hypothetical illustration using rates as of October 14, 2026, not a projection.
Why the highest rate isn't always the right one
The 6.25% contract on that board allows no free withdrawals at all. Pull money out early, and you would face surrender charges, often a market value adjustment as well, which can raise or lower what you receive as interest rates move. Before age 59½, withdrawals may also owe a 10% federal tax.
One of the 6.00% contracts from an A-rated insurer, on the other hand, lets you take 10% a year starting in year two, about $10,000 on a $100,000 contract, free of surrender charges. If a tuition bill, a new roof, or a helping hand for a grown child might show up in the next five years, that access can be worth more than a quarter point.
The highest rate on the board and the right rate for you can turn out to be two different numbers. Sorting that out is most of what an Annuity Review is for.
Where Carol landed, and how to weigh your own
Carol didn't just renew. She asked a question at a networking event, followed it through, and put that money into a MYGA. Her next decision comes when the term ends, and this time it will be a choice she plans for, not a default. At that point she can take the money, renew, move it to another annuity through an exchange that can generally keep the tax deferral intact, or turn it into income for life.
Your decision runs on the same three questions hers did. What rate can you get from an insurer you trust? When will the tax come due? When might you need the money? A MYGA tends to fit money with a five-year job that sits outside an IRA, while a CD still fits money you might need on short notice. If a move to Florida is somewhere in your plans, read what happens to your annuity when you move from New Jersey to Florida first. And the window is moving: at least one insurer on my rate sheet cut its MYGA rates effective October 15, 2026.
Ask the question Carol asked
If your CD matures soon, bring the maturity date and the balance. In 30 minutes, I'll share the highest MYGA rate available in New Jersey, after tax, alongside what the strongest insurers pay, with the access rules in plain English. It's the same conversation Carol started at a networking event. Then you decide.
Frequently asked questions about MYGAs and CDs
MYGA vs CD: which pays more after taxes?
As of October 2026, a five-year MYGA generally pays more. In New Jersey, MYGAs paid up to 6.30%, A-rated insurers about 6.00%, and the best five-year CDs about 5.00%. In a $100,000 example at a 24% federal bracket, an A-rated MYGA left roughly $5,200 more after tax than the best CD.
What is a MYGA?
A MYGA, or multi-year guaranteed annuity, is a fixed annuity that locks in an interest rate for a set term, usually three to ten years. It works much like a CD, but an insurance company issues it, and its growth is generally tax-deferred until you withdraw it.
Are MYGAs available in New Jersey?
Yes. Many insurers offer MYGAs to New Jersey residents, but rates and products vary by state, and some advertised rates aren't available here. As of October 14, 2026, five-year MYGAs available in New Jersey paid up to 6.30%. Always confirm a quoted rate is approved for your state.
Is MYGA interest taxed every year?
Generally, no, when you buy the MYGA with after-tax money. Growth stays in the contract and is taxed as ordinary income when you withdraw it, earnings first. CD interest is taxed in the year it is credited to you, even if it stays in the CD until maturity.
How is annuity income taxed in New Jersey?
New Jersey residents generally report taxable annuity income on their state return. Residents 62 or older with total income of $150,000 or less may exclude part or all of their retirement income under the state's pension exclusion. Withdrawal timing can affect how much of that exclusion you keep.
How is a MYGA protected if it is not FDIC insured?
The guaranteed rate and principal are backed by the financial strength and claims-paying ability of the issuing insurance company. That is why ratings from agencies such as AM Best matter. Weighing the rate together with the insurer's rating shows what you get for the extra yield.
Can I take money out of a MYGA before the term ends?
Usually, within limits. Many contracts allow a free withdrawal each year, often 10% or the interest earned, though some high-rate contracts allow none. Amounts above that may face surrender charges and a market value adjustment, and withdrawals before age 59½ may owe a 10% federal tax.
Can I move maturing CD money into a MYGA?
Yes. When your CD matures, you can put the proceeds into a MYGA instead of renewing it. The CD's interest was taxed along the way, so you are generally moving after-tax money. Timing the move to the maturity date, or a grace period if your bank offers one, avoids an early withdrawal penalty.
Can you hold a MYGA inside an IRA?
Yes. You can hold a MYGA in a traditional or Roth IRA, where the IRA's tax rules apply instead of the annuity's. The appeal there is the guaranteed rate for a set term. The tax deferral advantage over CDs matters most for money held outside retirement accounts.
Last reviewed: October 2026
Michael Trefel is a licensed insurance producer in New Jersey, Colorado, Florida, and Texas. Annuities are insurance products. They are not bank deposits and are not FDIC insured. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Withdrawals may be subject to surrender charges, ordinary income tax, and, before age 59½, a 10% federal tax penalty. This article is general education and is not tax, legal, or investment advice.
