The Comparison Everyone Asks For
Credit union treasurers know CDs. They're familiar, they're simple, and they're FDIC/NCUA insured (up to limits). So when someone suggests a fixed annuity, the first question is always: "How is this different from a CD?"
Fair question. Here's the honest comparison.
Side by Side
Rate
MYGAs from A-rated carriers have historically offered a yield premium over comparable-term brokered CDs — typically in the range of 50–150 basis points, depending on market conditions and term length.
Why? Insurance carriers invest their general accounts in longer-duration, higher-yielding assets (investment-grade corporates, commercial mortgages) than banks typically hold, and they pass through a portion of that spread. Rates change frequently, so always compare current offers.
Principal Protection
CD: FDIC insured up to $250K per depositor. Above that, you need to split across institutions or use CDARS/ICS. MYGA: Backed by the carrier's general account and state guaranty association coverage (typically $250K–$500K per carrier, varies by state). A-rated carriers have never missed a payment on institutional annuities.
Both are safe. The mechanisms are different.
Liquidity
CD: Early withdrawal penalty, typically 3–12 months of interest depending on term. MYGA: Most allow 10% annual penalty-free withdrawals. Full surrender has a declining charge schedule (often starting at 5–7%, declining to 0% at maturity).
CDs are slightly more liquid for full withdrawal. MYGAs offer more flexibility for partial access.
Tax Treatment
CD: Interest is taxable annually (though this is less relevant for tax-exempt credit unions). MYGA: Interest grows tax-deferred until withdrawal. For taxable entities like CUSOs or affiliated foundations, this is a meaningful advantage.
Regulatory Treatment
CD: Straightforward — classified as a deposit in another institution. MYGA: Classified as an investment under Part 703 or 701.19. Requires appropriate investment policy language and documentation. Not complicated, but requires deliberate compliance work.
Counterparty Risk
CD: Bank failure risk, mitigated by FDIC insurance. MYGA: Carrier insolvency risk, mitigated by AM Best ratings and state guaranty associations. The insurance industry has historically experienced very low failure rates among highly-rated carriers, and state guaranty associations provide an additional safety net.
When to Choose a CD
- You need maximum liquidity and short terms (< 2 years)
- Your investment policy doesn't yet authorize annuity products
- The amount is under $250K and FDIC coverage matters to your committee
When to Choose a MYGA
- You want the highest guaranteed rate for 2–7 year terms
- You have excess reserves beyond near-term liquidity needs
- You want to lock in rates before a potential decline
- You're managing funds for a CUSO, foundation, or nonprofit affiliate
The Practical Answer
Most credit unions don't choose one or the other — they use both. CDs for shorter-term, smaller positions. MYGAs for the portion of reserves where the rate premium and longer guarantee period deliver meaningful additional income.
Want a rate comparison between your current CD yields and available MYGA rates? Request a quote — we'll build it in 24 hours.