By Hans Scheil, CFP®, CLU®, ChFC®, CASL®, CLTC®

In my experience, when retirees sit down to talk about their savings, many of them start with an apology.

“I know I have too much money sitting in the bank.” Then, almost in the same breath: “But I’m worried about the market. I don’t want to lose this money.”

Both feelings make sense. What’s usually missing is one number: how much more that same safe money could earn if a portion of it were locked in at a guaranteed rate for a few years. Most people never calculate it, and it can add up to thousands of dollars.

An annuity that works like a CD

The word “annuity” scares a lot of people, and some of that reputation is earned. Certain annuities are complicated and carry high fees. A multi-year guaranteed annuity, or MYGA, is not one of those.

It is about as simple as annuities get. Here’s how it works:

• You pick a term. Terms run from 2 to 10 years. Put money in a five-year MYGA in September 2026 and it stays there until September 2031.
• Your rate is guaranteed. The rate you start with doesn’t change for the whole term, no matter what the market or interest rates do.
• There are no sales charges or fees. The rate you’re quoted is the rate you’re credited. Nothing is deducted from your balance.
• There’s a penalty for leaving early. Most MYGAs charge a surrender penalty if you pull all your money out before the term ends. It often starts around 8% and drops each year.

When the term ends, you can take the money, roll it into a new MYGA or move it somewhere else. In that sense, it behaves much like a CD at the bank.

The number most retirees never calculate

Consider a hypothetical retiree, Ruth, age 68. She has $300,000 in the bank, split between a money market account and one-year CDs. She’s earning around 3.5% and renewing the CDs every year.

Ruth moves $100,000 of that into a three-year MYGA from an A-rated insurer paying 5.5%. She keeps the other $200,000 right where it is.

That’s roughly $6,550 more over three years, on money that never touched the stock market. The CD figures also assume her bank keeps paying 3.5% at every renewal, which isn’t guaranteed.

Whether that trade-off is worth it depends on how much of her cash Ruth can comfortably leave alone for three years. That’s the question that matters most, and we’ll come back to it.

The tax benefit hiding in plain sight

The higher rate isn’t the only advantage. Interest on bank accounts and CDs is taxed every year, even if you never spend it.

For many retirees, that interest does more damage than they realize. An extra $9,000 of interest on your tax return can push up your Medicare premiums through IRMAA, the income-related surcharge. It can also cause more of your Social Security to be taxed.

Interest inside a MYGA bought with regular savings is tax-deferred. You don’t pay tax on it until you take it out. That can keep your taxable income lower today, and with planning, the money can often be withdrawn later in a tax-efficient way.

Tax-deferred doesn’t mean tax-free, though. You will owe tax eventually, so this works best on money you aren’t spending anyway.

MYGAs can also hold IRA money. A MYGA inside a traditional IRA stays tax-deferred, and one inside a Roth IRA stays tax-free. When the term ends, the money stays in the IRA. You can roll it into a new MYGA, an income annuity or your IRA brokerage account without triggering a tax bill.

If the stock market makes you nervous, or you’ve soured on bonds after 2022, a MYGA can stand in for part of the bond portion of your IRA. Its value doesn’t drop when interest rates rise.

The part everyone forgets: Getting to your money

Here’s where people get into trouble. They love the rate, so they want to put everything in.

If someone came to us with $100,000 in the bank and wanted to put all of it into a MYGA, we would talk them out of it. Life happens. The roof leaks, the car breaks down, a health issue comes up. You should never need to pay a surrender penalty to reach your emergency money.

That’s why we recommend MYGAs for some of your cash, not all of it. Keep a healthy emergency reserve in the bank first.

If you want more flexibility, you can build a MYGA ladder. Instead of one large MYGA, you split the money into several smaller ones that come due in different years.

We did this for a client who wanted none of her savings in the market and couldn’t qualify for long-term care insurance. We took $250,000 and divided it into five $50,000 MYGAs with terms of two, three, four, five and six years. Set up today, one would come due each year from 2028 through 2032.

If she ever needs care, about $65,000 or more becomes available every year for five years, with no penalty. If she doesn’t need it, each one rolls into a new MYGA as it matures. And because every MYGA names a beneficiary, whatever is left passes directly to her heirs.

How safe is it compared with a CD?

To be fair, a bank CD is technically safer. It’s backed by the FDIC. A MYGA is backed by the insurance company that issues it, plus your state’s insurance guaranty association, which has its own limits and conditions.

That’s why the insurer matters. We only show clients MYGAs from companies rated A- or better. Some B+ companies offer higher rates, but we leave them off our list.

Here are rates we found from A-rated companies as of August 20, 2026. Rates change often, so treat these as a snapshot, not a quote.

Notice that longer isn’t always better. On this list, some seven- and five-year rates beat the 10-year rates.

One more tip: most MYGA rates are compound interest, but a few companies quote simple interest. Simple-interest rates can look higher than they really are, so convert them to a compound rate before you compare.

3 steps to take this week

You don’t need an adviser to start. You need 15 minutes and your latest bank statements.

Add up your cash and decide on your emergency reserve. Total your checking, savings, money market and CD balances. Then decide how much you want within easy reach, no matter what.

Find out what your bank is actually paying. Look at the rate on each account, not just the balance. Multiply it out to see what that money earned last year.

Compare it to a guaranteed rate. Take the cash above your reserve and compare your bank’s rate with current MYGA rates from A-rated companies. Check whether each rate is compound or simple interest, and read the surrender schedule before you commit.

Watch the full explanation. If it helps to see this laid out on the whiteboard, [this video walks through how MYGAs work](VIDEO LINK), including CD comparisons, IRA use and the ladder strategy.

Put your safe money to work on purpose

Keeping cash in the bank isn’t a mistake. Keeping all of it there, earning less than it could, often is.

A MYGA won’t be right for everyone, and it should never hold money you might need next month. But for the portion of your savings you know you won’t touch for a few years, it can mean a higher guaranteed rate, no market risk and no fees.

For most of our clients, buying their first MYGA is a five-minute conversation. Run your own numbers first, then have that conversation with real figures on the table.

This article presents the views of the author and is for educational purposes only. Rates are as of August 20, 2026, and are subject to change. Annuity guarantees are backed by the claims-paying ability of the issuing insurance company.