Should You Roll Your CD Into an Annuity When It Matures?

CD maturity dates create a decision point most people handle on autopilot — they let the bank roll it over into another CD without comparing alternatives. Right now, that autopilot may be costing them real money.

Here is how to think through the decision properly.

What Happens When Your CD Matures

When a CD matures, you typically have a short window — often 7 to 10 days — to give the bank instructions. If you do nothing, it rolls over automatically at whatever rate the bank is currently offering. That rate may be lower than what you earned on the previous term.

Banks set their CD rates based on their own funding needs and the interest rate environment. When rates fall — which they often do between CD terms — your rollover rate can drop significantly with no warning.

The Alternative: A MYGA

A Multi-Year Guaranteed Annuity works almost identically to a CD from a structural standpoint: you deposit a lump sum, lock in a rate for a fixed term, and receive principal plus interest at maturity. The key differences:

Rate: Top MYGA rates are currently running 50 to 150 basis points higher than comparable bank CDs for most terms.

Taxes: CD interest is taxed annually. MYGA growth is tax-deferred — you pay taxes only when you withdraw. Over a 5-year term, this difference in compounding can add thousands to your ending balance.

Protection: CDs are FDIC-insured to $250,000. MYGAs are backed by the insurer and protected by the NJ Guaranty Association up to $500,000 — a higher limit for most savers.

Liquidity: Most MYGAs allow 10% free withdrawals annually. CDs typically allow no access without an early withdrawal penalty.

When to Choose the MYGA

A MYGA makes more sense than rolling into a CD if:

• MYGA rates are meaningfully higher (they typically are right now)
• You are in a tax bracket where deferring interest saves you money
• The funds are earmarked for retirement, not near-term spending
• Your CD balance is well within guaranty association coverage limits
• You want to lock in a rate before potential rate decreases

When to Stick with the CD

A CD is the better choice if:

• You need full flexibility to access the money within the term
• You are already at or near the FDIC coverage limit at that bank and want the federal insurance backstop
• The rate difference is minimal (less than 25 basis points)
• You are not comfortable with insurance company as counterparty

A Practical Example

$150,000 CD maturing. Bank is offering 4.50% for a new 5-year CD.

Top 5-year MYGA currently available in NJ: 6.00% from a B++ rated carrier, or 5.75% from a highly-rated A carrier.

5-year CD at 4.50%, taxes paid annually (22% bracket): After-tax ending balance: approximately $172,000

5-year MYGA at 5.75%, tax-deferred: Pre-tax ending balance: approximately $180,500 After-tax ending balance (assuming withdrawal at 22%): approximately $175,500

Even after accounting for deferred taxes on withdrawal, the MYGA wins by over $3,000. And if the funds stay in the annuity longer — common with retirement savings — the gap widens further.

The Process

Moving a maturing CD into a MYGA is straightforward. You initiate a direct transfer or provide a check, complete the annuity application, and the funds move at CD maturity. The whole process typically takes a few days and does not create a taxable event if done correctly.

If your CD is maturing in the next 30 to 60 days and you want to compare your options, reach out. We can run a side-by-side in about 10 minutes.