| Option | Gross Yield (2026) | Liquidity | Tax Treatment | 3-Year After-Tax (24%/9.3% CA) |
|---|---|---|---|---|
| HYSA (variable) | 4.50% then declining (hypothetical cut path) | Instant | Annual ordinary | ~$30,000 on $250K (if the Fed cuts; hypothetical) |
| 3-year direct CD | 4.85% | Locked, penalty if early | Annual ordinary | $24,250 on $250K |
| 3-year brokered CD | 4.95% | Secondary market | Annual ordinary | $24,750 on $250K |
| 3-year Treasury note | 4.10% | Secondary market | Fed only (state exempt) | $23,370 on $250K (CA tax exempt helps) |
| 3-year MYGA (A-rated) | 5.55% | Locked, surrender schedule | Deferred until withdrawal | $31,627 on $250K (compound + lower year-5 tax) |
Three reasons stack up:
Saver in CA, 24% federal + 9.3% CA, planning to use the money in year 3.
| Year | Balance | Interest | Tax (33.3%) | Net Added |
|---|---|---|---|---|
| 1 | $258,083 | $12,125 | $4,038 | $8,087 |
| 2 | $266,425 | $12,517 | $4,168 | $8,349 |
| 3 | $275,037 | $12,922 | $4,303 | $8,619 |
| End | $275,037 | $37,564 cum interest | $12,509 cum tax | $25,055 net |
| Year | Balance | Interest | Tax Paid |
|---|---|---|---|
| 1 | $263,875 | $13,875 | $0 |
| 2 | $278,520 | $14,645 | $0 |
| 3 | $293,978 | $15,458 | $0 |
| Year 3, withdraw all | $293,978 | $43,978 cum interest | $14,645 (one-time) |
| Net to keep | $279,333 |
MYGA result: $279,333. CD result: $275,055. MYGA wins by $4,278 on a 3-year $250K hold. Pure rate + tax-treatment advantage.
The MYGA has a surrender penalty for early withdrawal (usually 9-8-7% in years 1-3 for a 3-year MYGA, declining). If there's a 15%+ chance you'll touch the money in year 1-2, the MYGA's risk-adjusted return drops below the CD's. Stay in HYSA or CD for that uncertain capital.
The decision rule: only put money in a 3-year MYGA that you are 90%+ confident you won't need before year 3. Hold a separate emergency buffer in HYSA.
3-year Treasury notes pay ~4.10% in 2026, meaningfully below CDs and MYGAs. The reason: T-notes carry no credit risk and are extremely liquid. In a portfolio context, they're useful for the absolute-safety tier. As a pure yield play, they lose to CDs and MYGAs at this term.
Where T-notes win: state-tax-exempt income is valuable in CA/NY/NJ. The 4.10% T-note in CA is equivalent to a 4.70% taxable instrument. Still loses to MYGA but beats HYSA materially.
HYSA at 4.50% (June 2026 figure), in a hypothetical path where the Fed cuts 100-150 bps over 24 months. That is a scenario, not a forecast: the Fed made no cuts in 2026 and raised its target range to 3.75-4.00% on September 16, 2026 (FOMC statement).
| Year | Assumed HYSA Rate | Interest on $250K |
|---|---|---|
| 1 | 4.10% (avg) | $10,250 |
| 2 | 3.30% | $8,250 |
| 3 | 2.90% | $7,250 |
| 3-yr cumulative (CA after-tax) | $25,750 gross, $17,176 net |
HYSA after-tax = $17,176. Versus MYGA at $19,333 net (assuming bracket-controlled withdrawal). HYSA loses by $2,000+ at this scale even before accounting for the rate-floor protection MYGAs provide if cuts go deeper than expected.
In 2026, yes. The MYGA market reflects insurer bond portfolio yields which run slightly above bank deposit costs, and MYGA terms above 3 years invite stronger competition among carriers. Verify current carrier rates. They change monthly.
The contract beneficiary inherits the full account value (not just premium, the accumulated interest too). Most carriers waive surrender penalty on death. The beneficiary can take it as lump sum (taxable in year received) or as a stream of payments (spread the tax burden).
Most MYGAs include a 10% annual penalty-free withdrawal provision. Tax still applies (the withdrawn interest is ordinary income) but no surrender penalty. Read the contract. Some carriers don't offer this.
Low for A-rated carriers, especially given state guaranty fund backstops at $250K-$300K per owner per carrier. Diversify across 2+ carriers if your total MYGA position exceeds $250K. Check AM Best ratings annually.
Brokered CDs pay 5-15 bps more and offer secondary-market exit. Direct CDs offer early-withdrawal-with-penalty as an exit. Brokered is usually better if you have a brokerage; direct is simpler if you don't.
MYGA locks your rate. If new MYGAs at year 2 pay 7% (hypothetical spike), you're still earning your 5.55%. The asymmetry favors MYGA in a falling-rate environment, hurts in a rising-rate environment. The June 2026 base case was falling rates; the Fed instead raised its target range on September 16, 2026.
I-bonds (capped at $10K/year per person), municipal bonds in high-tax states (state-exempt yield can match MYGAs after-tax), and Series EE bonds (guaranteed-doubling structure makes ~3.5% over 20 years). All have constraints that limit them as portfolio replacements.
This article reflects publicly available rates, products, and tax law as of 2026-06-27. HYSA yields, CD rates, MYGA rates, and FDIC/state guaranty fund limits change frequently. Always confirm current values against the most recent provider disclosures and tax law before acting. This is general education, not a personal recommendation or an offer of any product. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated carriers across the annuity and long-term care insurance market. No compensation has been received from any bank, credit union, or insurance carrier in connection with the publication of this article. Always read the actual contract or account disclosure and consult a licensed advisor or tax professional before making material cash-management decisions. Past rate environments do not predict future rates.
Hans Goldstein is an Enrolled Agent, admitted to practice before the Internal Revenue Service. Not affiliated with or endorsed by the IRS. General education, not tax or legal advice for your situation.