How it works
Both a fixed annuity and a CD pay a set interest rate, but they're taxed differently. A CD's interest is taxed every year, which drags on compounding. A fixed annuity grows tax-deferred, so the full balance compounds and you only owe tax when you withdraw. This compares the two after tax — taxing the CD each year and the annuity's gains at the end. The annuity usually pulls ahead over long terms and high tax brackets, but CDs are FDIC-insured and more liquid.