Should I Move From HYSA to CD When Rates Fall?
TL;DR
Yes. In a falling-rate cycle, your HYSA yield will drop within 1-4 weeks of each Fed cut, while a 3- or 5-year CD or MYGA locks today's rate for the full term. On $100K, the lock-in advantage can be $2,000-$5,000 over a 3-year window during a typical cutting cycle. The mistake is staying in a variable HYSA and watching the yield bleed down 200+ bps over 18 months.
Savings account vs MYGA, after tax
What $100,000 earns in 5 years: savings account vs MYGA, after tax
Rates used: Savings account 4.00%, the top online savings rate we tracked (bank sites, September 24, 2026); savings rates can change any day; 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).
| Savings account, interest taxed every year | $116,604 |
|---|---|
| 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 savings account, after tax | $9,531 |
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.
Quick answer
Yes. When the Fed pivots from holding rates steady to cutting them, the HYSA is no longer the right instrument for any money you do not need in the next 90 days. Lock the rate at today's level using a CD, a MYGA, or a brokered CD. The HYSA will track the cuts down within 1-4 weeks of each FOMC meeting, while your locked product holds today's yield for the full term.
This is the symmetric mirror of the rising-rate playbook. In a hike cycle, HYSA wins because it tracks rates up. In a cut cycle, the locked product wins because the HYSA tracks rates down. Most savers know the first half of this rule. Few execute the second half.
Why HYSAs lose during rate cuts
Online HYSAs at Marcus, Ally, Discover, and Capital One 360 historically pass through 75-90% of Fed cuts within 4-6 weeks. That fast pass-through is the same feature that makes them attractive in hike cycles, just in the opposite direction.
The 2024-2025 cycle is a clean example. The Fed cut 100 bps total between September 2024 and December 2024. Top HYSA APYs went from ~5.00% to ~4.10% within 6 weeks of the final cut. Anyone who held HYSA through that window earned 60-90 bps less than someone who had locked a 3- or 5-year CD or MYGA at the August 2024 peak.
Rates expire like milk.
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Worked example (hypothetical): falling rates, $100,000 over 3 years
Assume the Fed is at peak and is about to start cutting. Starting HYSA APY = 4.50%. Available 3-year CD APY = 4.40%. Available 3-year MYGA APY = 5.30%. Fed cuts 25 bps every quarter for 4 quarters, then pauses.
| Quarter | HYSA APY | 3-yr CD APY (locked at 4.40%) | 3-yr MYGA APY (locked at 5.30%) |
|---|---|---|---|
| Q1 (June 2026) | 4.50% | 4.40% | 5.30% |
| Q2 (-25 bps) | 4.30% | 4.40% | 5.30% |
| Q3 (-25 bps) | 4.10% | 4.40% | 5.30% |
| Q4 (-25 bps) | 3.90% | 4.40% | 5.30% |
| Q5 (-25 bps, pause) | 3.70% | 4.40% | 5.30% |
| Q6-Q12 (pause) | 3.70% | 4.40% | 5.30% |
| 3-year blended APY | ~3.92% | 4.40% | 5.30% |
| Interest earned on $100K | ~$12,230 | ~$13,800 | ~$16,750 |
The 3-year CD wins by ~$1,570 over the HYSA. The 3-year MYGA wins by ~$4,520 over the HYSA, before the tax-deferral compounding edge. In a 24% bracket, the MYGA deferral adds another ~$700-$900 of after-tax value.
The signal: how do you know rates are falling?
You will not catch the absolute peak, but you can identify the regime change. Signals:
- Fed dot plot pivots from hikes to cuts. Watch the SEP (Summary of Economic Projections) every quarter. When the median dot moves down, the cycle is turning.
- 2-year Treasury yield starts dropping aggressively. The 2-year is the most sensitive market measure of expected Fed policy. It typically leads the actual policy pivot by 3-6 months.
- CD curve un-inverts. When 5-year CDs start paying more than 1-year CDs again, the market has priced in the cutting cycle.
- Fed Chair language shifts from "appropriate to firm" to "data-dependent" to "approaching the time to ease."
By the time the third or fourth signal is firing, you should be moving money out of HYSA into locked products. Waiting for the first cut to land before acting means missing the best lock-in window.
CD vs MYGA: which lock?
For a 1-2 year lock, CDs win on simplicity and FDIC insurance. The yield gap between a top 2-year CD and a 2-year MYGA is usually only 30-60 bps, which is rarely enough to overcome the contract complexity.
For a 3-7 year lock, MYGAs almost always win. The yield gap widens to 100-150 bps because insurance carriers can hold longer-duration bonds and pass more yield through. Add tax deferral on non-qualified money, and the gap grows further. The trade-off is liquidity: MYGAs have a sliding surrender schedule (commonly 7-6-5-4-3-2-1%) plus an MVA, while CDs have a fixed early-withdrawal penalty (typically 6-12 months of interest).
See CD ladder vs MYGA ladder for the full side-by-side.
When the answer changes
Three exceptions to the "lock during cuts" rule:
- You need the money inside 12 months. Lock-in doesn't help if you need to break the contract before the rate window closes. Stay in HYSA for short-horizon money.
- The rate cycle is already at the trough. Locking 4.40% at the bottom of a cycle means you ride the next 5 years through the next hike cycle without rate participation. Only lock if today's rate is meaningfully above where you think the next 3-5 year average will be.
- Your bank pays you a big retention bonus on the HYSA. Some online banks offer time-limited promotional APYs that meaningfully exceed the falling environment. Read the small print. Promos typically expire in 6 months.
Common mistakes
- Waiting for the first cut to land before locking. The CD and MYGA market prices in expected cuts months ahead of the actual policy move. By the time the Fed cuts, the lock-in rates have already dropped 30-60 bps.
- Locking too short. A 1-year CD at 4.40% in a falling cycle just kicks the problem 12 months down the road, when you will be reinvesting at 3.50% or lower. The point of locking is to extend duration.
- Ignoring the MYGA option because it sounds complex. A non-qualified MYGA is structurally a CD with insurance-carrier backing instead of FDIC backing, 100-150 bps more yield, and tax deferral. The complexity is overstated by people unfamiliar with the product.
- Not laddering. Putting all the money into one 5-year lock means reinvesting all of it at once at whatever rate prevails in 2031. A 3-5-7 ladder smooths reinvestment risk.
- Forgetting the tax bracket. The MYGA deferral edge is bigger in higher brackets. A 32% bracket gets ~3x the deferral compounding benefit of a 12% bracket. Bracket matters.
What to do next
As of September 28, 2026 the Fed is not cutting: it made no cuts in 2026 and raised its target to 3.75-4.00% on September 16 (Federal Reserve). If a cutting cycle does start and you have $50K+ in a variable HYSA (top HYSAs paid 3.00-4.00% on September 24, 2026), the cost of inaction is real. Run the math against current 3- and 5-year MYGA quotes (A-rated 5-year MYGAs paid about 5.50% to 6.05% on October 14, 2026, per public carrier rate sheets), factor in your tax bracket, and decide on a horizon.
For independent verification, get a side-by-side comparison of your current HYSA, a top 3-year CD, and 2-3 A-rated MYGA quotes. See HYSA vs MYGA for 3-year money and What happens to my HYSA rate when the Fed cuts.
Frequently asked follow-up questions
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Disclosure
This article reflects publicly available HYSA, CD, and annuity rate information approximate to the date above. High-yield savings rates are variable and change frequently, often weekly. Always confirm current rates directly with the institution before opening 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. HYSAs and CDs are deposit products of FDIC-insured banks or NCUA-insured credit unions; MYGAs and other 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.