CD Ladder vs Annuity Ladder Calculator: Compare Your Retirement Income Ladders (2026)

Retirees building guaranteed income from savings face the same fork in the road every time: split the money across a schedule of certificates of deposit, or split it across a schedule of multi-year guaranteed annuities (MYGAs). Both are “ladders.” Both are built from fixed-rate instruments issued by banks or insurers. Both promise predictable income. And yet the two ladders behave very differently once the draw phase begins — in how much income they produce, in how much liquidity you keep, and in what is left for your heirs.

This page gives you a working CD ladder vs annuity ladder calculator that prices both strategies from the same deposit, then answers the question neither product’s sales literature will ask: if one ladder runs out before the other, what would it cost — in dollars per month — to backfill the missing years with term life insurance so your spouse or heirs never feel the gap?

What Is a CD Ladder?

A CD ladder divides a lump sum across several certificates of deposit with staggered maturity dates — for example, five equal deposits maturing in one, two, three, four, and five years. As each rung matures, you reinvest it at the longest maturity, so by the end of the build phase the entire deposit is earning the long-end rate while a rung still matures every year. Banks price CDs against the federal funds rate, and after the September 2026 hike that rate sits at 3.75%–4.00%; the best five-year CDs nationally pay roughly 4.50%–4.95%, according to Bankrate's October 2026 survey.

The ladder's defining feature is liquidity. Every rung is a bank deposit: principal up to $250,000 per depositor per bank is backed by FDIC insurance, and once the ladder is rolling, a rung matures every twelve months. If you need the money, you never have to break a contract — you wait for the next maturity date.

What Is an Annuity Ladder?

An annuity ladder divides the same lump sum across several multi-year guaranteed annuities — fixed annuities with, say, three-, five-, and seven-year surrender schedules. Each MYGA credits a guaranteed rate for its full term; the top five-year MYGAs in October 2026 pay between 5.80% and 6.30%, with Athene's MaxRate at 5.85% effective September 25, 2026. Like the CD ladder, the annuity ladder can be rolled: as one contract reaches term end, you can 1035-exchange it into a new MYGA without triggering a taxable event.

Why does the annuity pay more? The rate advantage comes from two places. First, insurers invest in long-duration bonds and pass through more yield than banks competing for short-term deposits. Second, MYGA interest compounds tax-deferred — you pay ordinary income tax only when you withdraw, while CD interest is taxed every year even if you never touch it. At a 24% federal bracket plus 5% state tax, a 4.50% CD compounds at roughly 3.29% after tax while a 5.85% MYGA compounds at the full 5.85%.

What the Calculator Shows: Same Deposit, Different Engines

The calculator above runs both ladders through the same three-phase model:

1. Build phase. Your deposit compounds at the CD rate for the CD build years and at the annuity rate for the annuity build years, using the standard future value of an annuity-due formula.
2. Draw phase. Each ladder's accumulated principal is converted into level annual withdrawals over its draw period, solving the ordinary annuity payment formula at each ladder's own growth rate. The draw can be as short as one year or as long as forty.
3. Legacy restoration. Whichever ladder stops paying first leaves a hole. The calculator sizes a term life insurance policy to fill it: the missing income × the remaining draw years, rounded up to the nearest $25,000, priced on the same market-realistic 2026 rate table used across this site's calculators.

At the default inputs — a $250,000 deposit, a 4.50% CD ladder built over five years, and a 5.85% annuity ladder built over ten — the annuity ladder produces roughly $19,000 more income per year, but over a 20-year draw instead of a 10-year one. That is the structural truth of the comparison: deferral duration dominates rate. A lower rate compounded for twice as long beats a higher rate compounded briefly, every time, in this engine. The lesson is not "annuities always win" — it is that the two ladders are answering different questions. The CD ladder answers "how much income can I get soon, with full liquidity?" The annuity ladder answers "how much income can I get later, if I can lock the money up?"

The Liquidity Trade-Off the Income Numbers Hide

Income per year is the wrong metric if you might need the principal. The two ladders treat early access completely differently:

• CD early access: a penalty of typically three to six months of interest, set by the bank's disclosure. Painful, capped, and disclosed.
• MYGA early access: a surrender charge schedule — commonly 7%–9% in year one, declining roughly one point per year — applied to any withdrawal above the contract's free-withdrawal provision (often 10% of the account value per year). Most MYGAs also offer hardship windows: nursing-home and terminal-illness waivers, and a death-of-owner full escape.
• FDIC vs state guaranty association: CDs carry FDIC coverage to $250,000 per depositor per bank. MYGAs are backed by the issuing carrier and by your state's guaranty association, which caps protection at $250,000 in present value for most states ($300,000 in a handful; New York, Connecticut, and Washington go to $500,000).

When Each Ladder Actually Wins

The honest answer from the calculator's default scenarios:

Notice the pattern. The annuity ladder wins whenever both ladders have similar timelines, because its rate is higher and its compounding is untaxed. The CD ladder only wins when you give it a materially longer build at a materially higher rate — which is another way of saying the CD ladder wins when you value liquidity enough to sacrifice deferral, and the market happens to pay you for short money. Neither conclusion is universal; both depend on the rate environment you face when each rung matures.

The Legacy Problem: What an Annuity Ladder Burns

Here is the trade-off that never appears in a rate comparison. A CD ladder that you draw down over ten years still holds real dollars at every moment, and if you die mid-ladder those dollars are in your estate, available to your heirs. An annuity ladder drawn to exhaustion does the same — but a MYGA ladder that you annuitize or drain completely converts every dollar into income, and when the last payment is made, nothing remains. If your spouse or children were counting on the principal itself, the annuity's higher income has silently spent your legacy.

The calculator's legacy card quantifies the fix. At the defaults, the CD ladder's draw ends after year 10 while the annuity ladder keeps paying through year 20 — so a household that chose the CD route could buy roughly a $1.7 million term policy to replicate the annuity's missing decade of income, for on the order of $265 per month at age 60 male standard. The same logic runs in reverse: if you take the annuity's higher income but want the principal back for your heirs, a life insurance policy funded from the income difference can restore the estate the annuity is consuming. Insurance turns an income decision back into a legacy decision.

Taxes: The Second Engine Under the Annuity's Advantage

Every dollar of MYGA growth is taxed as ordinary income when withdrawn, but only when withdrawn. CD interest is taxed annually whether or not you take it. In a 32% combined bracket, the after-tax compounding rates look like this:

The MYGA's terminal after-tax value still beats the CD at most brackets — our site's dedicated MYGA vs CD calculator runs that comparison to the dollar and finds a break-even MYGA rate near 4.39% at a 24% bracket: below that CD rate, the CD wins despite the deferral. If you are under age 59½, an additional 10% early-distribution penalty applies to MYGA gains under IRC §72(q) — one more reason annuity ladders belong in the over-59½ phase of a retirement plan.

How to Actually Build Each Ladder

Whatever the calculator says for your numbers, the mechanics matter:

• CD ladder build: keep each rung under $250,000 per issuing bank, ladder maturities 6–18 months apart, and reinvest each maturity at the longest rung. Keep 1–2 rungs in short maturities if there is any chance you will need the money.
• MYGA ladder build: verify each carrier's AM Best rating and your state's guaranty association caps before buying — spread across carriers if your deposit exceeds the caps. Confirm the surrender schedule in the contract itself, the free-withdrawal percentage, and the death-of-owner escape clause. Ask whether the contract offers a 1035 exchange out at term end.
• Either ladder: decide before you buy what happens at the end. A ladder without a draw plan becomes a series of reflex renewals at whatever rate the market offers that week — our MYGA renewal calculator shows why that default can cost tens of thousands.

Where Life Insurance Fits the Picture

Two distinct roles, and the calculator only models the first:

1. Legacy restoration. If you choose the ladder with the higher income but a shorter tail — or the one that burns principal — a term life policy sized to the missing income × missing years restores what your family loses. This is the tool's legacy card, and it is priced from the same market table as every calculator on this site.
2. Survivor income. Neither ladder is designed around a survivor's monthly needs. If your spouse depends on the ladder income, compare that need against a dedicated survivor-benefit strategy — our Social Security survivor benefits calculator models what the government layer already provides before your ladder pays a dollar.

Assumptions and Limitations

• Rates are user inputs; the tool does not forecast future CD or MYGA rates. Reinvestment risk — the chance that matured rungs reinvest lower — is real and not modeled.
• The draw-phase engine assumes level nominal withdrawals; it does not model inflation adjustments, cost-of-living riders, or GLWB riders.
• Tax deferral is modeled by treating MYGA compounding as untaxed during build; exit-tax drag on the annuity leg is disclosed in our dedicated MYGA-vs-CD tool rather than re-modeled here.
• The legacy premium uses a market-realistic 20-year term table for a male standard class at your entered age; female rates run roughly 22% lower, tobacco roughly 2.8× higher, and preferred roughly 15% lower. It is an estimate, not a quote.
• FDIC limits ($250,000 per depositor per bank) and state guaranty association caps ($250,000–$500,000 in present value by state) are not enforced inside the calculator — check your own concentration.

Frequently Asked Questions

Is a CD ladder or an annuity ladder better for retirement income?

For most retirees past 59½, the annuity (MYGA) ladder produces more income from the same deposit because its rate is higher and its compounding is tax-deferred — at October 2026 rates, roughly 5.85% versus 4.50% on five-year money. The CD ladder wins when you need liquidity, when you are under 59½ (the §72(q) penalty hurts), or when short-term CD rates spike above available MYGA rates. Run your own numbers in the calculator above; the margin moves with every rate change.

How much more does an annuity ladder pay than a CD ladder?

At the calculator's defaults — $250,000, five-year build for the CD, ten-year build for the MYGA — the annuity ladder pays about $23,400 per year over 20 years against the CD ladder's about $14,400 over 10 years. But the totals are not directly comparable: the annuity is paying more per year for twice as long, from a build phase that ran twice as long. When both ladders share the same timeline, the MYGA's edge comes mostly from tax deferral and shrinks to a few hundred dollars per year.

What happens to my annuity ladder if the insurance company fails?

Your contracts are backed first by the carrier's claims-paying ability and second by your state's guaranty association, which protects up to $250,000 in present value of annuity benefits per person per insurer in most states — $300,000 in New York, Connecticut, Washington and a handful of others, and up to $410,000 in Minnesota for annuities. Check ratings at AM Best and keep each carrier's exposure under your state's caps. This is one structural advantage of CDs: FDIC coverage is a federal guarantee, not a state-regulated one.

Can I lose money in a MYGA?

Your principal and credited interest are guaranteed by the carrier for the contract term — you cannot lose value from market moves the way a variable annuity can. The losses that do occur come from surrender charges if you exit early (commonly 7%–9% in year one), from the 10% §72(q) penalty if you withdraw gains before 59½, and from inflation if the guaranteed rate runs below the cost of living for the whole term.

How does the legacy restoration number in the calculator work?

The calculator finds the years where one ladder has stopped paying but the other still pays, multiplies the missing annual income by those missing years, rounds up to the nearest $25,000, and prices a level term life policy on that face amount using a 2026 market rate table. It answers: "if I want my family to receive the same total value the winning ladder delivers, what does the insurance backstop cost per month?" For many 60-ish households the answer is $100–$300 per month — often less than the income difference itself.

Should I put my whole retirement fund into a ladder?

Almost never. Ladders are the guaranteed-income floor of a retirement plan, not the whole plan. Keep an emergency reserve outside both structures, keep tax-diversified accounts (Roth, taxable) for flexibility, and consider that neither ladder grows meaningfully above inflation. The calculators on this site are decision tools for the guaranteed slice, not a substitute for a full retirement plan.

Do CD ladders and annuity ladders both avoid probate?

Only if a beneficiary is named. CDs with a payable-on-death (POD) designation and annuities with a named beneficiary transfer directly to that person outside probate in nearly every state. Without a beneficiary, both fall into the estate and settle through probate — a slower, public, fee-carrying process. Name beneficiaries on every rung, and review them after divorces, deaths, and moves.

Key Takeaways

• An annuity (MYGA) ladder beats a CD ladder on income at October 2026 rates for most timelines past 59½, driven by a ~1.35-point rate advantage plus tax-deferred compounding.
• The CD ladder's advantage is liquidity: annual maturities, FDIC backing, and capped early-exit penalties instead of surrender schedules.
• Deferral duration dominates rate in the income math — a longer build at a lower rate can beat a shorter build at a higher rate.
• The hidden cost of the higher-income ladder is legacy: principal drawn to income is principal your heirs never see, and a term life policy sized to the missing years restores it for $100–$300/month in many cases.
• Run both ladders with your own rates above, then check carrier safety (AM Best + state guaranty caps) before committing the annuity side.

Related Resources

• MYGA vs CD Calculator: After-Tax Comparison — the single-deposit version of this comparison with surrender-charge and break-even rate modeling.
• MYGA Renewal Calculator — what to do when a MYGA rung reaches term end: renew, 1035-exchange, or cash out.
• Annuity vs Life Insurance Calculator — when the legacy goal changes the product answer entirely.
• Social Security Survivor Benefits Calculator — the government income layer your ladder sits on top of.
• Life Insurance Duration Calculator — how long a death benefit lasts against a monthly income need.

External references: AM Best carrier ratings, NAIC consumer resources (including state guaranty association information), and IRS Publication 525 on the taxation of annuity payments.