Interest rates may have peaked. Should you buy a CD, high-yield savings account, or a fixed annuity?

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Nov 2, 2023, 4:02 PM | Updated: Jan 31, 2024, 11:32 am


Interest rates are the highest they’ve been in decades, and it looks like the Fed has paused hikes. This may be the best time to lock in rates for long-term, low-risk financial products like fixed annuities.

You already know that interest rates are high — they’re the highest they’ve been in over 20 years

But there are some signs that we may have hit the peak. In late September, the Federal Reserve chose to maintain interest rates where they were rather than increase them further.

The Fed has also signaled that they are hoping to avoid raising interest rates any further. One member of the central bank’s policy committee has said, “I believe we may be at the point where we can be patient and hold rates steady and let the monetary policy actions we have taken do their work.”

If interest rates have indeed gone as high as they will go, what does that mean for you saving for retirement? How can you take advantage of the high interest rates?

This may be the ideal time to put your retirement savings in low-risk financial products (check out our guide on Who Assumes the Investment Risk With a Fixed Annuity Contract) that are offering historically high interest rates: High-yield savings accounts, certificates of deposit (CDs), and fixed annuities.

This article explains what those are and which might be the best option for you to take advantage of unusually high interest rates.

High-Yield Savings

High-yield savings accounts are a type of deposit account offered by financial institutions that provide a higher interest rate than traditional savings accounts. They are designed to attract customers who want to earn more interest on their savings without exposing themselves to stock market risk or other more volatile investments.

Some of the benefits of high-yield savings accounts include:

  • Higher interest rates. They typically offer significantly higher interest rates than regular savings accounts, helping you earn more on your savings.
  • No market risk. Unlike stocksbonds, or mutual funds, you won’t lose your principal amount due to market fluctuations.
  • Liquidity. You can access your funds relatively easily, although, depending on the bank, there may be some limits on transactions.
  • Interest Rate Lock. You can lock in your interest rate from the minute you place money in a high-yield savings account.

On the other hand, they have some significant drawbacks, too:

  • Variable rates. The interest rate is typically variable, meaning it can change based on the economic environment or at the bank’s discretion.
  • Transaction limits. There can be a limit on the number of withdrawals or transfers you can make each month without incurring a fee.
  • Lower returns compared to other options. While they offer better returns than traditional savings accounts, the returns might be lower than other products, like CDs or annuities.

As of today, the highest high-yield savings account rate is 5.50%.

Certificate of Deposits

CDs are term-deposit accounts offered by banks and credit unions. They typically come with a fixed term, ranging from a few months to several years, during which the depositor agrees not to withdraw the funds.

In return, CDs generally offer higher interest rates than standard savings accounts.

Some of the advantages of CDs include:

  • Higher interest rates. Generally, CDs offer higher interest rates than traditional savings accounts, especially for longer terms.
  • Fixed rate. Your rate is typically locked in, providing predictability for your returns.
  • Safety. Like savings accounts, CDs at FDIC-insured banks (or NCUSIF-insured credit unions) are insured up to the maximum allowed by law.
  • Interest Rate Lock. Most CDs feature a locked-in interest rate. The rate that you buy into today will stay the same until the CD matures.

Some disadvantages include:

  • Lack of liquidity. Your money is tied up for the term of the CD, and early withdrawals come with penalties.
  • Inflation risk. If the term of the CD is long and interest rates rise, the fixed rate might fall behind inflation, reducing your purchasing power.
  • Opportunity cost. If market interest rates rise significantly during your CD’s term, you’re locked into the lower rate and might miss out on better earning opportunities.
  • Early withdrawal penalties. If you need to access your money before the CD matures, you could face substantial penalties.
  • Taxes. Interest earned on CDs is taxable as income in the year it is earned, even if you don’t take the money out of the CD.

As of today, the highest CD rate is 4.65% for 5 years.


A fixed annuity is a financial product sold by insurance companies. At its core, a fixed annuity is just a contract between you and the company.

You pay them a lump sum of money upfront (or over time) and in return, they promise to make periodic payments to you either immediately (immediate annuities) or in the future (deferred annuities).

Some of the advantages of fixed annuities are:

  • Guaranteed lifetime income. Fixed annuities can provide a steady stream of income for a set period or for life.
  • Tax deferral. Money in a fixed deferred annuity grows tax-deferred, which means you don’t pay taxes on the earnings until you withdraw them.
  • Flexible payout options. You can opt for payouts that last for a certain period, for your lifetime, or even for the lifetime of you and a spouse.
  • Death benefits. Some annuities offer a death benefit, ensuring that if you die before the annuity payments begin, a designated beneficiary will receive a specified amount.
  • Interest Rate Lock. One type of fixed annuity, called a Multi-Year Guaranteed Annuity (MYGA), allows you to lock in your interest rate for a specified period of time. In a high interest rate environment like we’re currently in, you may be able to lock in very high rates for many years.

Disadvantages include:

  • Limited liquidity. Withdrawing funds from an annuity before a certain age or date can result in surrender charges or tax penalties.
  • Insurance company risk. The guarantees of an annuity are only as good as the financial strength of the insurance company that sells it. You need to make sure you choose a top-rated annuity company with a solid financial record.
  • Potential for lower returns. While fixed annuities provide guaranteed returns, those returns may be lower than what one might achieve through other, more risky, investments.

As of today, the highest fixed annuity interest rate is 6.5% for 5 years.

Comparing All Three Options

Which is the best option? There’s no all-around winner—savings accounts, CDs, and fixed annuities each have their own ideal use case.

  • If you want to have your cash available to use at any time while also earning a decent return, a high-yield savings account may be a good choice.
  • If you want a slightly higher interest rate and don’t mind not having access to your money in the short term, a CD may make sense for you.
  • If you want to grow your retirement savings over the long term, enjoy tax advantages, and be able to convert to a guaranteed lifetime income, a fixed annuity may make the most sense for you.

If you’re planning for retirement, are near retirement, or are in retirement, low-risk fixed annuities could be a powerful addition to your portfolio.

Get Top Rates for Your Annuity


Interest rates are the highest they’ve been in decades, and there are some signs that we are at the top of the market.

To maximize returns on your retirement savings, this may be the right moment to lock in a great rate for years to come.

Canvas Annuity offers fixed annuities that provide you with a low-risk way to grow your nest egg at a steady clip. Later, you can choose to withdraw your money in a lump sum or have it paid back to you as retirement income.

Thinking about locking in your retirement savings at a great rate? Call our licensed reps to learn more or apply online in just a few easy steps today.

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Interest rates may have peaked. Should you buy a CD, high-yield savings account, or a fixed annuity?