On October 14, 2026 the 5-year Treasury par yield was 5.00%, the same as the top nationally available 5-year CD (5.00% APY), so the choice between them is no longer about rate. It comes down to state tax, access to your money and who stands behind the promise (RLF MYGA vs CD Spread Index, Edition 2, data as of October 14, 2026).
What are the alternatives to CDs?
Seven options cover most of what retirees use a CD for. They differ on who backs the promise, how quickly you can reach the money and how the interest is taxed.
| Alternative | Backed by | Access | Tax note | Watch-out |
|---|---|---|---|---|
| Treasury bills and notes | U.S. government (full faith and credit) | Hold to maturity or sell any business day | Federal tax; exempt from state and local income tax | Selling before maturity can be at a loss when rates rise |
| Treasury or CD ladder | Same as the holdings | Part matures every year or two | As above | Takes setup; reinvestment rate can fall |
| TIPS | U.S. government | Hold to maturity or sell | Inflation adjustments are taxed each year before you receive them | Real return, not a fixed dollar rate |
| I bonds | U.S. government | Locked 12 months; lose last 3 months of interest if cashed before 5 years | Exempt from state and local tax | $10,000 a year purchase limit per Social Security number, electronic |
| High-yield savings, money market deposit accounts | The bank, FDIC insured to $250,000 | Immediate | Fully taxable | Rate can fall at any time |
| Money market mutual funds | The fund; not FDIC insured | Next business day | Fully taxable (Treasury-only funds can pass through some state exemption) | Not an insured deposit |
| Multi-year guaranteed annuity (MYGA) | The insurer, then a state guaranty association | Surrender charge if you leave early | Interest deferred until withdrawn; taxed as ordinary income | Not FDIC insured; see below |
Sources: FDIC (insured deposits, and products it does not insure, last updated May 12, 2026), IRS Publication 550 (Treasury bills, notes and bonds: "subject to federal income tax but is exempt from all state and local income taxes"), TreasuryDirect, I bonds (12 months before redemption, lose the last 3 months of interest before 5 years, $10,000 electronic limit per calendar year), all checked October 15, 2026. Details vary by account and product.
Is a Treasury better than a CD?
For a taxpayer in a state with an income tax, often yes at equal rates. Treasury interest is exempt from state and local income tax (IRS Publication 550), CD interest is not. As an illustration only: a 5.00% Treasury yield is worth about 5.51% before state tax to a California taxpayer in the 9.3% bracket (5.00 divided by 0.907). The CD wins when you want a fixed date, FDIC-insured simplicity in an IRA, or a bank's early-withdrawal rule instead of a market price. In a tax-deferred account like an IRA the state tax edge does not apply.
What is a CD ladder, and does it beat a single CD?
A ladder splits the money across maturities, for example $50,000 each at 1, 2, 3, 4 and 5 years. Each year one rung matures, so some cash is always close to coming due and you can reinvest at the new rate. You give up a little yield on the short rungs when the curve rises with maturity. The same idea works with Treasuries. On October 14, 2026 the 3-year Treasury par yield was 4.92% and the 7-year 5.09%, so the curve was nearly flat and the penalty for choosing shorter terms was small (RLF spread index, Treasury par yields).
Are MYGAs an alternative to CDs?
They compete for the same money. On October 14, 2026 the highest 5-year rate on four tracked public insurer rate sheets was 6.05%, against a top 5-year CD of 5.00% (RLF spread index, Edition 2). The extra 1.05 points is not free: a MYGA is not FDIC insured, its guarantee comes from the insurer, a state guaranty association backs it only up to a limit (commonly $250,000 per insurer), and leaving early usually costs a surrender charge. Read the fine print first: are fixed annuities safe, annuity vs CD and what a MYGA is. RLF does not sell or recommend any product.
What is safer than a CD?
A CD within the FDIC limit is already very safe. Treasury securities are backed by the full faith and credit of the U.S. government (the FDIC notes this beside its list of uninsured products) and have no dollar cap. If you hold more than $250,000 at one bank in one ownership category, spreading it across banks or using Treasuries keeps every dollar insured or government backed.
How to choose in four questions
- When do you need the money? Anything needed within a year belongs in cash or short Treasury bills, not a product with an exit charge.
- Is it in an IRA or a taxable account? State tax matters only in the taxable account.
- Does any one institution hold more than its protection limit?
- Do you need income that keeps up with inflation? If so, a fixed rate for five years may not do it; compare TIPS and I bonds.
Read This Before You Sign
A one-page checklist: the red flags in annuity and indexed universal life (IUL) sales, and the questions to ask before you sign anything. A one-page list for checking an insurer's ratings, ownership and your state's guaranty limit before you buy. We’ll email it to you.
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Sources
- Retirement Literacy Foundation: MYGA vs CD Spread Index, Edition 2 (data as of October 14, 2026; Treasury par yields and CD APY)
- FDIC: Financial Products That Are Not Insured by the FDIC (last updated May 12, 2026; checked October 15, 2026)
- FDIC: Deposit Insurance (standard coverage $250,000 per depositor, per insured bank, per ownership category)
- IRS Publication 550: Investment Income and Expenses (Treasury bills, notes and bonds; checked October 15, 2026)
- TreasuryDirect: I bonds (checked October 15, 2026)
- TreasuryDirect: Treasury Inflation-Protected Securities
- NOLHGA: How You're Protected (annuity guaranty limits by state; information as of June 1, 2025)
The Retirement Literacy Foundation is a 501(c)(3) public charity. This page is general education, not tax, legal or investment advice. Nothing is sold here, no product is recommended, and RLF accepts no funding from financial companies. Rules and figures change; each one above shows its source and date. Check anything you plan to act on with your state insurance department or a qualified professional who is not paid on the product.