MYGA vs 5-year Treasury vs 5-year corporate bond
| MYGA Annuity | Treasury Bond | Corporate Bond | |
|---|---|---|---|
| Typical 5-year yield | 5.75% – 6.10% | 4.00% – 4.50% | 5.00% – 5.50% |
| Credit risk | Carrier (A-rated) + state guaranty | U.S. Government (highest) | Issuer-dependent |
| Tax treatment | Tax-deferred until withdrawn | Federal-only (state-exempt) | Fully taxable annually |
| Liquidity before maturity | Limited (surrender charge) | Daily market trading | Daily market trading |
| Interest-rate risk | None if held to term | Yes if sold early | Yes if sold early |
| Minimum deposit | $10k–$25k | $100 (T-Direct) | Often $1,000–$5,000 |
| Can convert to lifetime income | Yes | No | No |
Where annuities win
- Higher yield, lower volatility: A MYGA delivers a Treasury-beating rate with no mark-to-market volatility.
- Tax deferral: No annual 1099-INT means interest compounds without tax drag.
- Lifetime income optionality: Annuitization or income riders convert principal to a guaranteed stream — bonds can't.
Where bonds win
- Liquidity: Sell any business day at the market price.
- Credit quality: Treasuries are the world's safest credit; nothing else compares.
- Capital gains potential: Bond prices rise when rates fall — annuities don't.
- State tax advantage: Treasury interest is exempt from state and local income tax.
The portfolio answer
Most retirees don't choose one or the other — they use both. Treasuries and short-duration bonds hold the liquid sleeve for spending in the next 1–3 years; MYGAs and FIAs anchor the intermediate sleeve (3–10 year horizon) at a higher guaranteed rate. SPIAs or DIAs can be layered on top to cover essential lifetime expenses.
See live MYGA rates or compare against bank CDs.
Frequently asked questions
- Is an annuity better than a bond?
- It depends on your goal. Annuities offer higher guaranteed yield (typically 50–150 basis points over comparable Treasuries) and tax deferral, but with limited liquidity. Bonds offer market liquidity and price transparency, but expose you to interest-rate risk if sold before maturity and are taxed annually.
- Do annuities pay more than bonds?
- MYGAs generally pay more than same-maturity Treasury bonds because insurance carriers invest in higher-yielding investment-grade corporate bonds and earn a spread. A 5-year MYGA paying 5.75% typically beats a 5-year Treasury by 50–100 basis points and matches or beats most investment-grade corporate bonds of similar duration.
- Are bonds safer than annuities?
- U.S. Treasury bonds are backed by the full faith and credit of the U.S. government — the highest credit quality available. Fixed annuities are backed by the issuing insurance carrier and state guaranty associations. A-rated annuities are very safe, but Treasuries are categorically safer on credit quality. The trade-off is yield.
- Can I lose money in an annuity or bond?
- Fixed annuities held to term: no market loss, only surrender charges if you exit early. Bonds held to maturity: face value returned. Bonds sold before maturity: market price fluctuates with interest rates and you may receive less than you paid.
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