CD Rates During a Rising-Rate Environment: Position for Hikes
TL;DR
When the Fed is hiking, short-term CDs win and long-term CDs lose in real time. A 6-month CD that rolls four times during a hiking cycle can capture an average yield 100+ bps higher than a 5-year CD locked at the start of the cycle. The optimal strategy is a short-end-heavy ladder or barbell, with the long end deferred until you see signs of the hiking cycle ending.
CD vs MYGA, after tax
What $100,000 earns in 5 years: CD vs MYGA, after tax
Rates used: CD 5.00%, the top nationally available 5-year CD (Bankrate, October 14, 2026); change it to the rate you are offered. MYGA 5.95%, the best A-rated rate we track as of October 13, 2026: Delaware Life Pinnacle Plus 5-year (AM Best A-, negative outlook, 7/31/2026), $100,000 and up, effective October 6, 2026 (Delaware Life rate sheet).
| CD, interest taxed every year | $121,081 |
|---|---|
| MYGA, tax-deferred, before tax | $133,507 |
| MYGA after paying tax on all the interest at withdrawal | $126,136 |
| Tax deferral alone adds about | $674 |
| MYGA ahead of the CD, after tax | $5,055 |
Assumes 22% federal and 0% state income tax, no withdrawals, rates held for the whole term. MYGA interest is taxed as ordinary income when you withdraw it, not as capital gains. Gains taken before age 59 1/2 can owe a 10% IRS penalty, and cashing out early can cost a surrender charge. In an IRA both grow tax-deferred, so the edge there is the rate alone. Bank and credit union deposits are FDIC or NCUA insured up to the limits; a MYGA is backed by the issuing insurer's claims-paying ability and your state's guaranty association up to its limits, not the FDIC. General education, not tax, legal or financial advice.
The mechanics of rising rates
When the Fed hikes, three things happen to CDs:
- New-money rates rise. Banks compete to attract deposits and pay up. Top-tier CD rates rise within 30 to 60 days of each Fed hike.
- Existing CDs continue at their locked (now-lower) rate. Holders face the opportunity cost of locked-in below-market yield.
- Short maturities benefit fastest. Each rollover captures the new higher rate.
The classic 2022-2023 hiking cycle illustrates this:
| Date | Fed Funds | Top 1-yr CD | Top 5-yr CD |
|---|---|---|---|
| Jan 2022 | 0.08% | 0.85% | 1.10% |
| Jul 2022 | 1.68% | 2.85% | 3.20% |
| Jan 2023 | 4.33% | 4.85% | 4.50% |
| Jul 2023 | 5.08% | 5.40% | 4.85% |
| Jan 2024 | 5.33% | 5.50% | 5.00% |
A saver who locked a 5-year CD at 1.10 percent in January 2022 was earning roughly 400 bps below the 1-year rate by July 2023. Painful.
A saver who rolled 6-month CDs through the same period captured roughly:
- H1 2022: 0.85% average
- H2 2022: 2.50% average
- H1 2023: 4.50% average
- H2 2023: 5.30% average
- Blended 2-year yield: ~3.30 percent vs the 5-year locked at 1.10 percent
Rates expire like milk.
The best MYGA, CD and savings rates change every few weeks. Get a short email when a rate on this page changes.
We’ll email you when a rate on this page changes. Hans Goldstein · NPN 20602398.
Rather talk it through? Or book 15 minutes on Hans’s calendar.
The optimal rising-rate structure
Strategy 1: Rolling short ladder
Open 3-month or 6-month CDs. Each maturity rolls into a new short CD at the then-current (higher) rate. Best for buyers who believe the hiking cycle has substantial room to run.
Trade-off: You miss the long-end rate cap when it eventually arrives. If hikes stop or reverse, the next roll captures whatever the new lower short-end rate is, and you have no long-term protection.
Strategy 2: Short-heavy barbell
70 to 80 percent in 6-month CDs, 20 to 30 percent in 3-year CDs. The 3-year provides a floor; the 6-month rolls up with the cycle.
Trade-off: The 3-year piece locks in an early-cycle rate that quickly looks like a missed opportunity. But it caps your blended yield against catastrophic rate reversal.
Strategy 3: HYSA-heavy with watchful trigger
Keep most of the conservative allocation in a top-tier HYSA (currently 4.50 to 4.85 percent) that adjusts upward as the Fed hikes. When you see signs of the hiking cycle peaking (Fed pause statements, falling inflation), lock 5-year CDs aggressively.
Trade-off: HYSA rates do not always rise as fast as the best 6-month CDs. The yield-tracking lag costs some opportunity yield during the active hiking phase. You also need to actively monitor and pull the trigger; this is not a set-and-forget strategy.
What NOT to do in a rising-rate cycle
- Lock long 5-year CDs at the start of the cycle. You will spend the next 3 years watching short-term rates climb past you.
- Build a traditional 5-rung 1-5 year ladder. The middle and long rungs lock in below-market rates that will look terrible 12 months in.
- Auto-renew maturing CDs without checking new-money rates. The standard rollover rate lags new-money rates badly during rising cycles.
- Ignore brokered CDs. Brokered CDs can be sold on the secondary market if rates rise dramatically, allowing you to redeploy without an EWP.
The hiking-cycle exit signal
The transition from hiking to pausing to cutting is the key moment. Three signals to watch:
- Fed pause language. When the FOMC statement says "data-dependent" instead of "additional firming," the hiking cycle is effectively done.
- Yield curve inversion deepens. The 2-year Treasury yielding much more than the 10-year suggests the market expects cuts.
- Inflation reaching the 2 percent target. Once core PCE is durably below 3 percent, the Fed has cover to cut.
When these signals align, switch from short-rolling to long-locking immediately. The 6-month rate is about to peak; the 5-year rate is about to become a fixed-income gift.
The 2024-2025 transition: a case study
The Fed paused in mid-2023 and began cuts in late 2024. Savers who stayed in 6-month CDs throughout 2023 captured 5.30+ percent yields. But savers who pivoted to 5-year CDs in mid-2024 at 5.00 percent locked in that rate through 2029, while the 6-month rate dropped to 4.45 percent by mid-2026.
The pivot timing mattered enormously. Pivoting in Q3 2023 (slightly early) captured 4.85 percent on the 5-year, also a respectable lock. Pivoting in Q3 2025 (slightly late) captured 4.55 percent on the 5-year. The window of optimal pivot timing was roughly 9 months wide.
The next turn came in 2026. After cutting to 3.50-3.75% by December 2025, the Fed made no cuts, held through its July 2026 meeting, and raised its target range 0.25 point to 3.75-4.00% on September 16, 2026 (FOMC statement). One hike does not make a hiking cycle, and the Fed has not said what comes next. Remaining 2026 meetings are October 27-28 and December 8-9.
Where a MYGA replaces this analysis
MYGAs are typically not optimal during the active hiking phase because the long lock-in misses the rising short-end rates. But MYGAs are structurally better than CDs for the post-pivot lock: a 5-year MYGA at the cycle peak locks 100 bps more than a 5-year CD at the same moment.
The optimal hybrid is: roll short CDs during the active hiking phase, then pivot to a 5- or 7-year MYGA when the cycle peak is identified. The MYGA captures the cycle peak with more yield and tax-deferral that the CD does not offer.
See our CD vs MYGA comparison for the post-pivot math.
Operational checklist for rising-rate cycles
- Maintain 60-80 percent in 3-month or 6-month CDs that roll automatically.
- Keep 20-40 percent in shorter-term ladder rungs (12 to 24 months max) for some duration without long lock.
- Do NOT lock 5-year or longer CDs while the Fed is actively hiking.
- Monitor Fed statements, core PCE, and yield curve quarterly.
- When the Fed pauses (or signals pause), evaluate the 5-year CD and 5-year MYGA market. Pivot if either offers an attractive cycle-peak rate.
- Do not try to time the exact peak. Capturing 90 percent of the peak rate within a few months is the realistic goal.
When this strategy beats simpler approaches
- You correctly identify a hiking cycle is starting. Short-rolling captures dollar-cost averaging into rising rates.
- You can actively monitor and pivot. The strategy requires attention; it is not set-and-forget.
- Your conservative allocation is large enough to justify the effort. $100K+ minimum.
When simpler is better
- You do not have time to monitor Fed signals. A traditional ladder dollar-cost averages across cycles passively.
- You are uncertain about cycle direction. A ladder hedges both ways.
- You have less than $50K in conservative allocation. The yield optimization is small in absolute dollars.
Related guides
- CD rates when the Fed is cutting
- 16 years of rate cycle history
- CD barbell strategy
- CD ladder vs MYGA ladder
Frequently asked follow-up questions
Want my independent take on whether a CD or MYGA fits your situation?
I'm a licensed independent producer (NPN 20602398) appointed with multiple A-rated carriers. I'll compare what your bank is offering against the top MYGA rates I see this week, and tell you straight which one fits your timeline, tax bracket, and liquidity needs.
No cost, no obligation. Written second opinion within one business day.
Rather talk it through? Or book 15 minutes on Hans’s calendar, or call 213-414-2808.
Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed producer
We’ll email it to you. Hans replies within one business day. Privacy Policy.
Disclosure
This article reflects publicly available CD, savings, and annuity rate information approximate to the date above. Rates change frequently, often weekly. Always confirm current rates directly with the institution before opening, renewing, or transferring. This is general educational content, not a personalized recommendation, solicitation, or offer of any specific product. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated carriers in the fixed-annuity market; Goldstein & Co. LLC is not a bank, broker-dealer, or registered investment adviser. CDs are deposit products of FDIC-insured banks or NCUA-insured credit unions; annuities are insurance contracts backed by the issuing carrier and state guaranty associations. FDIC and NCUA insurance limits are typically $250,000 per depositor per institution per ownership category. Tax discussion reflects federal law as of 2026 and is subject to change; consult a tax professional for your situation.