A contract-defined income option matters to you
Compare how an income option could affect access, account value, beneficiaries, riders, and cost.
How are an annuity and a CD different?
Learn how each one handles access, interest, taxes, time, guarantees, and risk. Then compare those differences with the financial goals you want your money to support.
Different tools, different promises.
| Question | Bank CD | Annuity contract |
|---|---|---|
| What it is | A time deposit at a bank or credit union. | A contract issued by an insurance company. |
| Protection behind it | Eligible bank deposits are covered by FDIC insurance within applicable limits and ownership categories. | Contract guarantees depend on the issuing insurer’s claims-paying ability; annuities are not FDIC-insured. |
| Access | Early withdrawal can trigger a bank penalty. Terms vary. | Withdrawals may face surrender charges, contract limits, taxes, and an additional federal tax before age 59½ in some situations. |
| Interest / growth | The stated CD rate applies for its term. | Crediting depends on the contract. Fixed and indexed annuities use different methods, caps, participation rates, spreads, and terms. |
| Taxes | Interest is generally taxable as it is credited unless the CD is held in a tax-advantaged account. | Nonqualified annuity growth is generally tax-deferred until distribution. Moving qualified retirement money into an annuity does not create extra tax deferral. |
| Income choices | A CD returns principal and interest; a withdrawal plan must be managed separately. | Some contracts offer annuitization or income riders. Amounts, cost, access, and death-benefit tradeoffs depend on the contract. |
| Best question | Do I need short-term access and federal deposit insurance? | How would this contract’s income options, guarantees, costs, and access provisions support my plans? |
A longer timeframe is possible
Compare the surrender period with the timing of expenses and the money you want to keep accessible.
The contract terms support your goals
Review the carrier illustration, disclosures, crediting rules, surrender schedule, alternatives, and insurer strength together.
- 1You want to compare access before an annuity surrender period ends.
- 2Federal deposit insurance matters for the money being considered.
- 3You want to understand a simple fixed term alongside an insurance contract with additional features.
- 4You want to compare whether the annuity features are useful enough to justify their costs and commitments.
Your comparison at a glance
CDs and annuities offer different ways to support your goals. Compare income, growth, access, guarantees, and costs together.
- 1A CD is a bank or credit-union deposit; an annuity is an insurance-company contract.
- 2A displayed rate is one part of the comparison. Access, time horizon, taxes, guarantees, fees, surrender rules, and alternatives also matter.
- 3An annuity is not FDIC-insured. Its guarantees depend on the issuing insurer and the contract.
- 4Use the comparison to decide which questions you want answered about access, income, guarantees, costs, and timing.
FDIC: Deposit Insurance · Investor.gov: Annuities · IRS Publication 575 · NAIC Buyer's Guide to Fixed Deferred Annuities