Your CD Is Maturing. Is a 5-Year Annuity Worth a Look?
October 6, 2026
A letter from your bank says your $50,000 CD matures next month. If your CD terms include automatic renewal and you don’t give the bank instructions, the money rolls into a new CD at the rate the bank sets on the renewal date. You’re 63, and you’d like part of the money available for a new car in two years. You’ve also heard that a five-year annuity locks in a rate, just like a CD.
So, which one deserves the money? A five-year annuity is worth a look for money you won’t need for five years and want to grow tax-deferred at a locked rate. A CD holds money you may need sooner or want covered by FDIC insurance.
What Is a 5-Year Annuity?
A five-year annuity is a multi-year guaranteed annuity, or MYGA. You pay a lump-sum premium, and the insurer credits interest at a fixed rate for five years. In a nonqualified contract, your earnings aren’t taxed until you withdraw them.
The structure will look familiar to a CD saver: a set rate for a set term, followed by a date when you decide again. At the end of each guaranteed interest rate period, the owner may renew the contract for any guarantee period and rate that is currently available. The renewal rate can’t fall below the certificate’s minimum guaranteed rate. During the 45 days before renewal, you can withdraw your money without a withdrawal charge. That window gives you time to compare the renewal rate with your other options, the same way you’re weighing your CD’s renewal offer now.
5-Year Annuity vs. CD: How Do They Compare?
A MYGA and a CD both lock in a rate. Here’s how they compare on everything else for money held in a regular, non-retirement account:
| 5-year annuity (1891 MYGA) | Bank CD | |
| Rate lock | Fixed rate for five years | Fixed rate for the CD’s term |
| Taxes | Earnings taxed when withdrawn | Interest taxed each year |
| Protection | Backed by 1891’s claims-paying ability; not FDIC insured | FDIC insured up to $250,000 per depositor, per bank, per ownership category |
| Early access | Up to 10% a year without a withdrawal charge, starting in year two | Bank early withdrawal penalty |
| Age rules | 10% IRS additional tax on taxable earnings withdrawn before 59½ | None in a regular account |
Rate Lock
A MYGA and a CD both lock your rate for the full term. If rates drop after you sign, your earnings don’t change. If rates rise, you keep the locked rate until the term ends. The guarantee also extends past the first term. When a CD renews automatically, as in the opening example, the bank sets the new rate, which isn’t guaranteed. When the 1891 MYGA renews, its rate can’t fall below the certificate’s minimum guaranteed rate.
For context, the FDIC’s national rate for a five-year CD with a balance under $100,000 was about 1.38% in September 2026. The FDIC calculates that figure as the average of rates across banks and credit unions, weighted by deposits so that individual offers can be higher or lower. Use the average as a reference point. If your bank’s renewal offer falls below it, look at other banks that pay more for the same five-year term. Compare your renewal offer with current rates from other banks and with the current 1891 MYGA rate. 1891 sets MYGA rates based on the premium amount and updates them over time. A representative can quote your current premium rate.
Taxes
A locked rate tells you what the money earns. Taxes determine how much of that growth you keep along the way.
CD interest is generally taxable in the year it’s credited to an account you can withdraw from without penalty. A five-year CD doesn’t postpone the bill. Under IRS rules for CDs, if your CD matures in more than one year, you must report part of the total interest as income each year, even before the CD pays it out. As a result, you owe tax each year on interest that stays in the CD, and you pay that tax from your other money.
A nonqualified MYGA, funded with after-tax savings, works differently. Because its earnings grow tax-deferred, you owe no tax on the interest during the five years, and your other savings don’t cover a yearly tax bill. When you withdraw, the IRS taxes the earnings as ordinary income and treats them as the first dollars out under the tax rules for a nonqualified annuity. Your withdrawals stay taxable until you’ve taken out all the earnings. You also choose the year you report them. If your income drops after you stop working, reporting the earnings then can mean a lower tax rate on them.
(The tax information in this article is general education and doesn’t constitute tax advice. A tax professional can tell you how these rules apply to your return.)
Protection
Tax treatment affects what you keep. Protection covers what happens if the institution holding your money fails.
FDIC deposit insurance covers CDs at FDIC-insured banks up to $250,000 per depositor, per bank, for each ownership category. The FDIC doesn’t cover annuities, even when a bank sells them.
A five-year annuity from 1891 relies on 1891’s financial strength and claims-paying ability. Without FDIC coverage, the MYGA’s locked rate and accumulation value depend on 1891 meeting its obligations.
For the $50,000 in the opening example, a CD at an FDIC-insured bank sits well inside the coverage limit. If FDIC coverage is the reason you chose CDs, you can keep part of the money in insured deposits and move the rest into a MYGA.
Access to Your Money
Protection covers the institution. Access covers you when you need money before the term ends.
Withdrawing from a CD before maturity incurs an early withdrawal penalty, and your CD agreement sets the amount. Check that penalty before you renew, since it sets the cost of reaching the money early for the next five years.
The 1891 MYGA has a withdrawal charge during the five-year term. Beginning in the second certificate year, 1891 waives the charge on withdrawals of up to 10% of the accumulation value as of the previous certificate anniversary.
Outside the 45 days before renewal, withdrawals above that 10% carry a charge. In the first certificate year, any withdrawal may incur a charge, so any money you might need within 12 months should go elsewhere. The withdrawal charge doesn’t reach your family. If you die during the term, your beneficiaries receive the accumulation value, and 1891 waives the withdrawal charges.
The IRS adds its own rule for annuities. A withdrawal of earnings before age 59½ may trigger a 10% additional tax on the taxable portion, on top of regular income tax. A CD in a regular (non-retirement) account has no IRS age rule. At 63, the saver from the opening is past 59½, so the additional tax wouldn’t apply. If you’re under 59½, plan MYGA withdrawals of earnings for after that birthday, or keep money you may need before then in a CD.
Which One Fits the Money Coming Due?
With the differences laid out, the decision comes down to when you’ll need each dollar.
Sort the maturing money by when you’ll need it. Dollars you’ve set aside for later and don’t expect to touch for five years fit a five-year annuity. In a regular account, those dollars also stop generating a yearly tax bill on interest you aren’t using. Dollars you may need within five years fit a CD, where the bank penalty is the main cost of reaching the money early.
You don’t have to choose one for the whole balance. In the opening example, the car money could go into a new CD that matures before the purchase, and the rest could move into a five-year annuity. The 1891 MYGA accepts premiums starting at $1,000, so you can move a portion and leave the rest at the bank. It also accepts qualified or nonqualified funds, so the same split works for IRA money. In an IRA, a CD and a MYGA are both tax-deferred, so the tax comparison above applies only to money in a regular account.
Before You Click Renew
Before your CD matures, note the maturity date and the renewal rate your bank offers. Then estimate when you’ll need each part of the money, such as the car purchase in two years. Once you have those details, you can compare the bank’s offer to a MYGA in a single conversation.
You chose CDs because you value knowing what your money will earn. A MYGA keeps that certainty in place for five years at a time and gives you a charge-free window to reconsider before each renewal. An 1891 representative can share the current MYGA rate for your premium amount and help you decide whether a MYGA fits your situation.
At 1891 Financial Life, we specialize in tailored insurance solutions that meet diverse needs. Our team is equipped to help you navigate these decisions with expertise and compassion. Contact us today for personalized assistance and to explore your options.
About the Author
Thomas Adamson, CLU, ChFC, FICF, AMTC, CFFM
Thomas Adamson launched his insurance career in 1968 with New York Life and developed skills in management, marketing, recruiting, training, and development of new and experienced agents.
Tom has been involved in fraternal Home Office Sales, Marketing, Product Development, and Training for the last 20 years. He truly appreciates the opportunity to blend his faith with his profession. He has been an advocate for the agent in the Home Office and brings a unique perspective to marketing and product development. Tom is also involved in philanthropic efforts and community-based activities; as a dedicated parent and grandparent, he has a passion for volunteering on behalf of children.
Tom’s mission is to “provide an environment for agents to successfully design insurance plans that give our clients and members the financial peace of mind they deserve.”
About 1891 Financial Life
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