Printable checklist for your desk
Print this checklist and compare each choice against what the money is for.
Download the PDF (large print)The short version. CDs, Treasury bonds, and annuities are different promises from different backers. A bank CD is backed by FDIC insurance up to set limits, Treasury securities by the U.S. government, and an annuity by the issuing company with a state guaranty association behind it. Each trades access, growth, and protection differently, so the right comparison depends on what the money is for. [1, 2, 3]
Who stands behind each promise
| Choice | Backed by | Source |
|---|---|---|
| Bank CD | FDIC insurance, up to $250,000 per depositor, per insured bank, per ownership category. | [1] |
| U.S. Treasury securities | "Full faith and credit" of the U.S. government. They are not FDIC insured because they have a different backing. | [2, 3] |
| Annuity | The issuing insurance company. Not FDIC insured. If the company fails, a state guaranty association may pay up to set limits, which vary by state. | [4, 5] |
Never treat a state guaranty association as federal insurance. Limits differ by state and by whether the contract is still deferred or already paying income. See our safety guide.
What a CD is
Investor.gov defines a certificate of deposit as a savings account that holds a fixed amount of money for a fixed period of time. Redeeming early may mean paying a penalty or forgoing part of the interest. [6]
What bonds and Treasuries are
- A bond is a loan. Investor.gov calls it a debt security, like an IOU. Held to maturity, you receive face value plus interest. [3]
- Interest-rate risk. When rates rise, the price of existing bonds falls. [2, 3]
- Inflation risk. Fixed interest loses purchasing power over time. [2, 3]
- Treasury maturities. Bills mature in up to 52 weeks, notes in up to 10 years, and bonds are typically 30 years, with interest every six months. [3]
- TIPS. Treasury Inflation-Protected Securities adjust principal with the Consumer Price Index. At maturity you receive the greater of the adjusted or original principal. [2, 3]
- I bonds. The rate combines a fixed rate that stays for the life of the bond with an inflation component that resets every six months. They cannot be redeemed in the first 12 months, and redeeming within five years forfeits the last three months of interest. Check TreasuryDirect for current rules and limits. [7]
Where annuities differ
| Feature | What regulators say |
|---|---|
| Access to money | Surrender charges, market value adjustments, and lost bonuses can reduce what you receive on early withdrawal. Surrender periods are typically six to ten years or longer. [8, 9] |
| Tax treatment | Growth is tax-deferred until withdrawal. Withdrawals before age 59 and a half may face a 10% additional federal tax. [10, 9] |
| Inflation | Fixed payments usually lack inflation adjustments. Inflation protection is available but costs significantly more. [11] |
| Longevity | Turning an annuity into income shifts the risk of outliving your money to the company, but the choice is generally irrevocable. [11] |
| Growth | Caps, participation rates, spreads, and lower credited rates all affect what you earn. [10, 9] |
How to compare them for your situation
- When will I need the money? If within the surrender period, a CD or Treasury may fit better. See when an annuity may not fit.
- What am I protecting against? Market loss, inflation, living longer than your money, or all three. No single choice addresses every risk.
- How much goes with one backer? Compare the amount against the $250,000 FDIC limit or your state's guaranty limit.
- What is the after-tax result? Ask a tax professional how each option would be reported for you.
Planners sometimes describe approaches such as bond ladders, where bonds mature in a staggered sequence, or "buckets," where money is divided by when it will be spent. Regulators have not published standard guidance on these, so we do not evaluate them here. If you are weighing them, ask whoever suggests them to show the assumptions and the costs.
Frequently asked questions
Are annuities insured like CDs?
No. Bank CDs are FDIC insured up to $250,000 per depositor, per bank, per ownership category. Annuities are backed by the issuing company, with state guaranty associations behind them up to limits that vary by state.
What backs Treasury securities?
The full faith and credit of the U.S. government, according to Investor.gov and FINRA.
Which is better, an annuity or a CD?
It depends on what the money is for and when you need it. Annuities have surrender charges, while CDs have early withdrawal penalties. Compare access, backing, taxes, and inflation.
Sources and review notes
- FDIC: Understanding deposit insurance
- FINRA: Smart bond investment strategies
- SEC Investor.gov: Bonds
- FINRA: Annuities
- NOLHGA: Product coverage FAQs (an association of state guaranty associations, not a regulator)
- SEC Investor.gov: Glossary, certificate of deposit
- TreasuryDirect: I bonds questions and answers (confirm current terms on TreasuryDirect)
- NAIC: Buyer's Guide to Fixed Deferred Annuities (revised 2013)
- SEC Investor.gov: Indexed annuities bulletin
- SEC Investor.gov: Annuities
- FINRA: Annuities (inflation and longevity)
About this guide. This is general education, not tax, legal, or investment advice, and it is not a recommendation to buy or not buy any product. Nazim Lokhandwala is a licensed insurance professional who offers fixed and indexed annuity products. He does not offer variable annuities or registered index-linked annuities. This guide covers every type so you can compare, and an annuity is not the right choice for everyone. Annuity guarantees depend on the claims-paying ability of the issuing insurer. Product features, rates, and rules vary by company and by state, so read your contract and ask the seller to explain anything that is unclear.