CD vs Money Market Fund (September 2026): CDs Pay 4.35%-4.50%, Funds 3.45%-3.76%
Written & reviewed by Hans Goldstein, EA, independent licensed insurance producer · CA license 4273294 · NPN 20602398Admitted to practice before the IRS
CD and fund rates checked on sponsor and bank sites on September 24, 2026 · Updated
Right now a CD pays more. The best 1-year and 5-year CDs paid about 4.35%-4.50% APY in late September 2026, while major money market funds yielded 3.45%-3.76%. A money market fund is for cash you need to reach any day; a CD is for money you can commit for a term. The fund is not FDIC insured; the CD is, up to $250,000 per ownership category.
CD vs money market fund side by side
| Bank CD | Money market mutual fund | |
|---|---|---|
| Rate today | Best 1-yr and 5-yr about 4.35%-4.50% APY (09/25/2026) | 3.45%-3.76% 7-day yield on major retail funds (09/23/2026) |
| Rate type | Fixed for the term | Variable; resets as holdings mature |
| Liquidity | Early-withdrawal penalty | Sell any business day |
| Insurance | FDIC or NCUA to $250,000 per ownership category | None; SIPC covers broker failure, not fund losses |
| Price | Principal returned at maturity | Seeks $1.00 per share; not guaranteed |
| State tax | Fully taxable | Partly exempt for funds holding direct U.S. government debt |
| Cost | No fee | Expense ratio, e.g. 0.07% (VUSXX) to 0.42% (SPAXX) |
Today's numbers
| Option | Rate | As of |
|---|---|---|
| Vanguard Treasury MMF (VUSXX) | 3.76% | 09/23/2026 |
| Vanguard Federal MMF (VMFXX) | 3.74% | 09/23/2026 |
| Schwab U.S. Treasury Money (SNSXX) | 3.50% | 09/23/2026 |
| Fidelity Government MMF (SPAXX) | 3.45% | 09/23/2026 |
| Best 1-year CDs (national) | 4.35%-4.50% APY | 09/25/2026 |
| Best 5-year CDs (national) | 4.35%-4.50% APY | 09/25/2026 |
| Marcus 12-month CD / 18-month to 6-year | 3.90% / 4.35% APY | 09/24/2026 |
| 1-year Treasury | 4.51% | 09/24/2026 |
| Federal funds target | 3.75%-4.00% | 09/17/2026 |
When a CD wins
- You can commit the money for the term and want the rate fixed.
- You want FDIC insurance and a known amount at maturity.
- Today: CDs out-yield money funds by roughly 0.6%-1.0%.
When a money market fund wins
- Cash you may need at any time, or brokerage cash waiting to be invested.
- High-tax-state savers using a Treasury fund, part of whose income can be state-exempt.
- Rates rising: the Fed raised its target to 3.75%-4.00% on September 16, 2026, and fund yields adjust automatically, while a CD is locked.
Breaking-the-buck risk
Money market funds seek a stable $1.00 price but do not guarantee it. The Reserve Primary Fund fell below $1.00 in September 2008 after losses on Lehman Brothers debt, and a small institutional fund did so in 1994. Government and Treasury funds hold short-term U.S. government debt and repurchase agreements backed by it, which is why they are considered the safest type.
5-year CD vs. a 5-year MYGA: $250,000 math
| $250,000 for 5 years | 5-year CD at 4.50% | 5-yr MYGA at 5.50% |
|---|---|---|
| Rate | 4.50% APY, fixed | 5.50%, fixed for the term |
| Tax on earnings | Every year | Deferred until withdrawn |
| Value after 5 years, after 24% federal tax | ~$295,800 | ~$308,300 (tax paid at the end) |
| Protection | FDIC, $250K per ownership category | Insurer claims-paying ability + state guaranty association (limits vary by state) |
| Getting out early | Interest penalty | Surrender charge above the free-withdrawal amount; IRS 10% penalty before 59½ |
About $12,500 more after federal tax on the MYGA (24% bracket, state tax ignored). For money you may need inside two years, or that must stay FDIC insured, the MYGA is the wrong tool. MYGA benchmark: carriers rated A or better topped out around 5.50% to 6.05% on 5-year compound-interest MYGAs, per public carrier rate sheets, October 14, 2026. Rates vary by state, premium and carrier.
CD vs money market fund: FAQ
Which pays more right now, a CD or a money market fund?
CDs. On September 24-25, 2026 the best 1-year and 5-year CDs paid about 4.35%-4.50% APY, while major money market funds yielded 3.45%-3.76% (7-day, September 23). An earlier version of this page said money funds paid 4.60%-4.90%; that was out of date.
Are money market funds FDIC insured?
No. A money market mutual fund is a security. SIPC protects against a brokerage firm failing, not against a fund losing value. CDs at FDIC-insured banks are covered up to $250,000 per depositor, per bank, per ownership category.
Has a money market fund ever broken the buck?
Rarely. The best-known case is the Reserve Primary Fund in September 2008, after losses on Lehman Brothers paper; a small institutional fund, Community Bankers U.S. Government Money Market Fund, did so in 1994.
How are CD and money market fund earnings taxed?
Both are taxed as ordinary income each year. Money fund income from direct U.S. government obligations may be partly state-exempt; CD interest is fully state-taxable.
When is a money market fund better than a CD?
For cash you may need at any time, or brokerage cash waiting to be invested. A CD is better when you can commit to a term and want a fixed rate and FDIC insurance.
What about money that can sit five years?
Compare a 5-year CD (best about 4.35%-4.50%) with a MYGA (A-rated-or-better insurers about 5.50%-6.05% on October 14, 2026, tax-deferred).
My take
In September 2026 CDs out-yield money market funds by about 0.6%-1.0%, so the fund earns its place only as the account you draw on. For money with a horizon of a year or more, use a CD or Treasury; for five years, compare a MYGA as well.
Hans Goldstein is an independent licensed insurance producer (CA license 4273294, NPN 20602398). He does not sell CDs, money market funds or other securities and gives no advice on them. Rates are copied from the sources named, as of the dates shown. MYGA figures are illustrations, not quotes.
Disclosure
This comparison reflects publicly available product information and approximate market yields as of the date stated above. CD, Treasury, bond, annuity, and money market rates change frequently: typically weekly for short-term instruments and monthly for annuities and bonds. Always confirm current values against the most recent issuer disclosure document, FDIC/NCUA insurance status, and the actual contract before purchasing. This is general education, not a personal recommendation or an offer of any product. Tax treatment described reflects U.S. federal and state law as of 2026 and is subject to change; consult a qualified tax professional. Hans Goldstein is an independent licensed insurance producer (NPN 20602398, CA Life License #4273294) appointed with multiple A-rated carriers; he does not sell CDs, Treasuries, mutual funds, or securities. No compensation has been received from any carrier or institution in connection with the publication of this comparison. FDIC insurance covers deposits up to $250,000 per depositor, per insured bank, per ownership category. State insurance guaranty fund coverage on annuities varies by state and is typically $250,000-$300,000 per owner per carrier. Past performance does not predict future returns.