Last updated: April 2026 | By Elizabeth Prescott
- In April 2026, a 5-year MYGA from an A-rated carrier pays roughly 5.40% to 5.60%; a 5-year U.S. Treasury yields about 4.30%.
- The MYGA pays ~125 basis points more, plus interest is tax-deferred. The Treasury is risk-free at the federal credit level and exempt from state income tax.
- For a buyer in a 24% federal bracket who does not need annual income, a 5-year MYGA at 5.55% beats a 5-year Treasury at 4.30% on after-tax compounded return – by a meaningful margin.
- For a buyer in a 0% bracket (low-income retiree, or money already inside an IRA) and prioritizing liquidity, the 5-year Treasury becomes more competitive.
U.S. Treasury bonds and multi-year guaranteed annuities (MYGAs) are the two cleanest fixed-income choices retirees consider when CDs mature. Both deliver a known yield over a fixed term. Both carry low return volatility. They differ in three concrete ways: headline yield, tax treatment, and credit/liquidity risk.
This guide walks through the comparison at April 2026 rates and lays out which fits which buyer.
Yield Comparison (April 2026)
| Term | Top A-Rated MYGA | U.S. Treasury Yield | Spread (bps) |
|---|---|---|---|
| 2 Year | 4.85% | 3.95% | +90 bps |
| 3 Year | 5.20% | 4.10% | +110 bps |
| 5 Year | 5.60% | 4.30% | +130 bps |
| 7 Year | 5.45% | 4.40% | +105 bps |
| 10 Year | 5.40% | 4.45% | +95 bps |
For 2026, the MYGA spread over Treasuries has hovered between 90 and 130 basis points depending on term. See live best MYGA rates for current numbers.
Tax Treatment Comparison
U.S. Treasury Bonds
- Federal: Coupon interest is taxable as ordinary income, paid every six months.
- State: Treasury interest is exempt from state and local income tax. This benefit is meaningful in California (top 13.3%), Hawaii (11%), New York City (effective 14.8%), and other high-tax jurisdictions.
- Capital gains: If you sell a Treasury before maturity at a price above what you paid, the gain is taxed as a capital gain.
MYGAs
- Tax deferral: Interest credits inside the contract; no annual 1099. Tax owed only when withdrawn, surrendered, or annuitized.
- Federal: Withdrawals taxed as ordinary income on a last-in-first-out basis (interest first).
- State: No state tax exemption like Treasuries. Withdrawals are taxed as ordinary income at both federal and state levels.
- Pre-59½ penalty: Withdrawals before age 59½ generally face a 10% IRS penalty in addition to ordinary income tax.
For deeper detail, see how are annuities taxed.
After-Tax Math: Two Scenarios
Scenario 1: 65-Year-Old in 24% Federal, 5% State
$100,000 in a 5-year MYGA at 5.55% vs. $100,000 in a 5-year Treasury at 4.30%.
| 5-Yr MYGA at 5.55% | 5-Yr Treasury at 4.30% | |
|---|---|---|
| Pre-tax growth (5 years) | $30,991 | $23,407 |
| Annual federal tax during contract | $0 (deferred) | ~$1,032/yr |
| Annual state tax during contract | $0 (deferred) | $0 (exempt) |
| End-of-term federal tax (24%) | $7,438 | $0 (already paid) |
| End-of-term state tax (5%) | $1,550 | $0 |
| Net after-tax return | $22,003 | $17,447 |
The MYGA wins by approximately $4,556 over five years on a $100,000 premium – largely because of compounding on gross interest, partly because of the higher headline rate. (Numbers approximate; actual results depend on rate locked.)
Scenario 2: 70-Year-Old in 12% Federal Bracket, No State Tax
Same $100,000 comparison.
- Treasury: Annual interest taxed at 12% federal, $0 state. Net annual yield ~3.78%.
- MYGA: Pre-tax 5.55% compounds. End-of-term tax 12% federal, $0 state. Net 5-year return roughly $25,440.
The MYGA still wins, but by a smaller margin. In low-bracket scenarios, the tax-deferral edge shrinks and the Treasury’s liquidity becomes more attractive on a per-dollar basis.
Credit Risk Comparison
- Treasuries: Backed by the full faith and credit of the U.S. government. Considered the global benchmark for credit-risk-free dollar assets.
- MYGAs: Backed by the issuing insurance carrier. AM Best A-rated carriers have decades-long records of meeting obligations. State guaranty associations provide a second-layer protection up to coverage limits, generally $250,000 of present value (varies by state). See state guaranty association coverage.
For absolute credit safety, Treasuries win. For the spread paid in exchange for accepting carrier credit risk, MYGAs from A-rated issuers offer 90-130 basis points of compensation.
Liquidity Comparison
| Feature | Treasury | MYGA |
|---|---|---|
| Sell before maturity | Yes – secondary market | Surrender charges 1-7 yrs |
| Penalty-free withdrawals | n/a (sell at market) | 10% per year typical |
| Market value risk if sold early | Yes – bond prices move with rates | Some have MVA; many don’t |
| Price transparency | Continuous market | Contract value statement |
Treasuries are clearly more liquid. MYGA buyers should plan to hold to maturity; selling early erases most of the yield premium.
When a Treasury Wins
- You may need access to the principal within 1-2 years.
- You live in a high-state-tax jurisdiction and benefit from Treasury interest’s state tax exemption.
- You are in a low federal bracket and don’t benefit much from MYGA tax deferral.
- You hold the bond in a tax-advantaged account, neutralizing the MYGA’s deferral advantage.
- Absolute credit safety outweighs the yield premium.
When a MYGA Wins
- You are in a 22%+ federal bracket today and can defer the tax to a lower-bracket future year.
- You don’t need current income; you are reinvesting interest anyway.
- You are comfortable holding to maturity over a 3-10 year horizon.
- You can split premiums across A-rated carriers to stay within state guaranty limits.
- The yield premium of ~100-130 bps materially improves your retirement outcome.
Common Mistakes
- Buying a MYGA inside an IRA without comparing yield only. The MYGA’s tax deferral is redundant inside an IRA. Pick the higher-yield instrument.
- Funding a MYGA with cash you may need before maturity. Surrender charges erase the yield premium quickly.
- Stretching for a B+ MYGA at 6.50%. Rate alone is not the metric. Pair the rate with the AM Best rating and your state guaranty limit.
- Ignoring state taxes on MYGA withdrawals. Treasury interest is state-tax-exempt; MYGA interest is not. In a 9-13% state, that’s a real drag.
Frequently Asked Questions
Why does a MYGA pay more than a Treasury of the same maturity?
MYGAs carry insurance carrier credit risk; Treasuries are backed by the U.S. government. The MYGA spread compensates buyers for accepting that incremental credit risk. The 90-130 basis point premium is consistent with the spread between corporate bonds and Treasuries of similar duration and rating.
Are MYGAs safe enough to compete with Treasuries?
For most retirees, an A-rated MYGA from a major carrier paired with state guaranty association coverage offers a credit profile comparable to investment-grade corporate bonds. It is not as safe as a Treasury. The spread compensates for that gap.
Can I hold a Treasury in a brokerage account and a MYGA at the same time?
Yes. Many retirees use both – Treasuries for short-term ladder rungs and current income, MYGAs for longer-term tax-deferred yield. See our MYGA vs bond ladder comparison for hybrid approaches.
What about TIPS (Treasury Inflation-Protected Securities)?
TIPS adjust principal for inflation but pay lower headline yields. They protect purchasing power; MYGAs do not. If inflation protection is the priority, TIPS or an inflation-adjusted SPIA fit better than a level-rate MYGA.
Where can I see live MYGA rates?
Current MYGA rates by term and carrier are on our best MYGA rates page. Treasury yields are published daily by the U.S. Treasury at treasury.gov.