Best Consumer CDs and Annuities of

How We Chose the Best CDs and Annuities 

When it comes to growing your short- and long-term safety net, moving your money out of a standard savings account and into investments is the best way to reap real growth. 

But riding the rollercoaster of risk and reward in the stock market may not match everyone’s investment style, which is why there are plenty of other smart strategies to grow your savings that can prove valuable without the volatility. 

Two of the most popular picks for risk-averse investors who prefer predictability or just like to diversify their assets are certificates of deposit (CDs) and annuities. These traditionally conservative investment options offer a safe, straightforward way to grow your money while still keeping it accessible if needed. 

Our team of researchers spent hours sorting through the features and fine print to summarize what you should consider when choosing between these trusted investment options, which is also what we relied on to narrow down our top recommendations. 

Key Differences Between CDs and Annuities 

Both CDs and annuities are a safe way to save for the future and even create a steady passive income stream into retirement. And while they are both considered low-risk ways to grow your savings, there are some differences between the two investment options that may make one better suited to help you grow and secure your financial future. 

Here are just a few main points of differentiation you need to know: 

• CDs are essentially a savings account with a fixed interest rate and date of maturity that dictates when you can access a lump sum payout, while annuities are a contract with an insurance company that can offer more flexible terms and payment options over an extended period of time.
• CDs are typically recommended for short- to medium-term savings, while annuities tend to be better for longer-term or retirement investments.
• CDs tend to come with lower penalties while annuities often pay a higher interest rate. 
• The interest incurred on CDs is considered taxable annually while annuities can offer tax deferral options   

The Most Important Criteria 

While not exactly the same, annuities and CDs do share some common points of consideration that come into play when choosing the best option for your needs and financial goals. We’ve summarized the main criteria we used when narrowing down our top picks, which can help guide your search as well. 

Rates

Both CDs and annuities are a much better way to earn a return on your savings than a traditional bank account thanks to their higher annual percent yields (APYs), or interest rates. Our recommendations include providers who offer competitive APYs on their fixed annuities and CDs, so customers can depend on a pre-set interest rate that is independent of market fluctuations. While rates will vary between providers, annuities often offer the best APY rates since they tend to have longer-term durations than CDs.

Terms

Traditionally, CDs are meant for short-term investments, like saving for a down payment on a house, new car or bucket-list trip. They tend to require a shorter commitment up front, from just a few months to a few years, before investors can withdraw their money when the CD reaches maturity or opt to renew. On the other hand, annuities are better suited for retirement savings and come with a three-year minimum, but can be as long as 10 years (or longer). The longer terms of annuities contribute to the greater chance of growth and better interest rates, but may not be best for people who need more liquidity. 

Taxes 

While the earned interest on both annuities and CDs is considered taxable income, when you pay those taxes differs between the two, which can make a big difference. Fixed annuities are typically tax-deferred, which means you only pay taxes on your earnings when you begin withdrawing money. This can be beneficial when used for retirement, as your annual income will likely be lower at this stage of your life, which will mean lower taxes on your earnings. On the other hand, the interest earned from a CD is considered taxable income that must be paid yearly to the IRS. 

Fees

Banks don’t typically charge fees for opening, closing or managing a CD, but you will most likely see the fees or penalties stack up if you decide to withdraw your funds before the end of the agreed-upon term. While annuities have different types of fees depending on what plan and insurer you choose, fixed annuities, like the ones that made our list, tend to have a simpler and more manageable fee structure than variable annuities. You may also incur early withdrawal fees with fixed annuities, including surrender charges, but they often are more flexible than CDs, allowing customers to withdraw a certain amount of the balance each year fee-free.

Withdrawals 

When a CD reaches its maturity date, you are able to withdraw your entire balance in one lump sum. You can also choose to renew or transfer all of part of your balance for a new term and rate. Fixed annuities offer greater flexibility for withdrawing your money, especially when it comes to setting up a passive income stream for retirement. While you can choose a one-time full payout, you can also set up an annuity to distribute a recurring monthly, quarterly or annual payment over multiple years to provide a steady source of income well into your retirement years. 

Security

Fixed annuities and CDs are considered safe, conservative investment options that are not subject to extreme shifts in the market. But between the two, only CDs from banks are backed by federal protection under the FDIC, which guarantees you will not lose your principal investment up to a certain amount. Annuities are not FDIC insured, and instead rely on the financial strength and stability of the insurance company that issued them. This makes it extremely important to properly vet the companies you’re considering opening an annuity with, which we took very seriously when compiling our recommendations. 

Disclosure
Gainbridge products featured on this site—FastBreak™, SteadyPace™, and ParityFlex™—are issued by Gainbridge Life Insurance Company (NAIC #15691), which is licensed in 49 states, the District of Columbia, and Puerto Rico, excluding New York. FastBreak™ is a non–tax-deferred multi-year guaranteed annuity (MYGA), meaning interest earned is taxed annually. Withdrawals of up to 10% of the account value per year are allowed without penalty; however, excess withdrawals may be subject to surrender charges and market value adjustments. SteadyPace™ and ParityFlex™ are tax-deferred MYGAs, where earnings grow tax-deferred until withdrawal. Withdrawals made before age 59½ may incur IRS penalties. ParityFlex™ additionally offers a Guaranteed Lifetime Withdrawal Benefit (GLWB), providing the option for lifelong income, subject to withdrawal limits and surrender charges.

These annuities are not FDIC-insured bank products and their guarantees depend on the claims-paying ability of Gainbridge Life Insurance Company, which may also be subject to coverage by state guaranty associations. Rates, fees, terms, and conditions may change at the discretion of the issuer. Please review Gainbridge’s full legal disclosures here before making any decisions.

CIT Bank
For complete list of account details and fees, see our Personal Account disclosures.