Retirement income guide
Annuities vs. bonds and CDs: what's different
People who want safety in retirement often compare a fixed annuity with bonds or CDs. They overlap, but they aren't the same tool. Here is how they differ.
By Dan Huslin, licensed insurance agent · Updated November 2026
Side by side
| Fixed-rate annuity (MYGA) | Bank CD | Bonds or bond funds | |
|---|---|---|---|
| Return | Set rate for a set term | Set rate for a set term | Interest payments; price moves with rates |
| Backed by | The insurance company, plus state guaranty association limits that vary by state | FDIC or NCUA insurance, up to the limits | The issuer; no insurance |
| Access | About 10% free per year; surrender charge beyond that | Early withdrawal penalty | Sell any time at the market price |
| Value can fall? | Not from rate changes if held to term | No, if held to term | Yes, when interest rates rise |
| Taxes | Deferred until you withdraw | Interest taxed each year | Interest taxed each year |
| Lifetime income option | Yes, by converting to an income annuity | No | No |
Where each one makes sense
- Bonds and bond funds are liquid and easy to adjust. They fit money you may need or want to reposition. Their prices can drop when rates rise, and a fund has no maturity date.
- CDs are simple and insured, and work for short-term money. Interest is taxed every year, even if you reinvest it.
- A fixed-rate annuity fits money you can leave alone for the term. Growth isn't taxed until you take it out, and the rate is known up front. Your protection comes from the insurer's financial strength, so check its ratings.
What bonds and CDs can't do
Neither one can promise income for life. An income annuity pools risk across many people, so it can keep paying for as long as you live, which no pile of bonds can promise. That's the one job an annuity does that the others can't.
It isn't either/or
Many retirees hold all three: CDs or cash for the next year or two, bonds for flexibility, and an annuity for the portion they want protected or turned into income. Rates change, so compare current offers side by side before you decide.