Treasury vs FDIC-Insured CD Safety, The Honest Comparison
| Instrument | Yield / rate | Source, as of |
|---|---|---|
| 52-week T-bill | 4.48% | U.S. Treasury daily bill rates (coupon equivalent), 9/25/2026 |
| 1-year Treasury | 4.50% | U.S. Treasury par yield curve, 9/25/2026 |
| 5-year Treasury note | 4.98% | U.S. Treasury par yield curve, 9/25/2026 |
| Top nationally available 1-year CD | 4.35-4.50% APY | DepositAccounts 1-year CD table, 9/25/2026 |
| Top nationally available 5-year CD | 4.35-4.50% APY | DepositAccounts 5-year CD table, 9/24/2026 |
| FDIC national average 60-month CD | 1.38% | FDIC National Rates and Rate Caps, 9/21/2026 |
| A-rated 5-year MYGA (top of market) | 5.50-6.05% | public carrier rate sheets, 10/14/2026 |
This page compares safety, not yield; rates are shown so you can see what each layer of protection currently pays. Deposit insurance limit: $250,000 per depositor, per insured bank, per ownership category.
Treasury note vs MYGA, after tax
What $100,000 earns in 5 years: treasury note vs MYGA, after tax
Rates used: Treasury note 5.06%, the 5-year Treasury par yield (U.S. Treasury, October 2, 2026); Treasury interest is free of state tax; 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).
| Treasury note, interest taxed every year | $121,354 |
|---|---|
| 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 treasury note, after tax | $4,781 |
Assumes 22% federal and 0% state income tax, no withdrawals, rates held for the whole term. Treasury interest is free of state tax, so state tax applies to the MYGA only. 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. 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.
What "safe" actually means here
The relevant safety question for fixed-income at a retail level is: "What's the probability I won't get my full principal back?" For both U.S. Treasuries and FDIC-insured CDs, the answer is essentially zero, but the mechanisms are different and the edge cases matter.
| Dimension | U.S. Treasury | FDIC-insured CD |
|---|---|---|
| Backing | U.S. Treasury direct obligation: full faith and credit | FDIC Deposit Insurance Fund: also full faith and credit |
| Coverage limit | Unlimited | $250,000 per depositor per bank per ownership category |
| Default probability | Essentially zero (treated as risk-free benchmark) | Essentially zero under cap; uninsured exposure above cap |
| What happens in bank failure | Treasuries not held by failed bank: unaffected | FDIC pays insured amount within 1-2 business days |
| Historical default | None (U.S. Treasury has not defaulted on debt) | Modern era: depositors under cap recovered 100% in all cases |
| Bank failure history (2008-2023) | N/A: Treasury didn't fail | Hundreds of bank failures; all FDIC-insured deposits paid in full |
| Coverage if FDIC fund is depleted? | N/A | Treasury would replenish via Treasury borrowing, so backstopped by full faith and credit anyway |
| Coverage on accrued interest | Yes (paid at maturity) | Yes (accrued interest covered up to limit) |
Rates expire like milk.
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The case for Treasuries on safety
- Unlimited backing. No cap. If you have $5M of cash, you can own $5M of Treasuries with full government backing. To get $5M of FDIC coverage, you'd need 20 separate banks.
- No bank failure friction. If your bank fails, your CD is FDIC-insured but you'll wait 1-2 business days for the payment, and you'll lose the original CD rate (FDIC pays current balance, you re-deposit elsewhere at then-prevailing rates). Treasuries in your brokerage are unaffected by the brokerage's solvency (held in custody, segregated from broker's assets).
- Cleaner in systemic crisis. In a true financial crisis (2008-style), Treasury clearing continues normally. Bank deposit insurance has never failed but the resolution mechanism is more complex.
- Trust/estate simplicity. Above-cap holdings in CDs require ownership-category structuring (joint, retirement, trust, etc.) to extend FDIC coverage. Treasuries have no equivalent friction.
The case for CDs on safety (yes, this exists)
- Identical backing under the cap. FDIC is also backed by U.S. government full faith and credit. For amounts under $250K per bank, the practical safety is the same as a Treasury.
- No interest-rate price risk. CDs return principal + accrued interest at maturity (or with EWP if early). Treasuries can be sold for less than face value if rates have risen.
- Held-to-maturity certainty. Bank CDs don't have a secondary market; you can't see the price drop daily and panic. Brokered CDs and Treasuries do; this creates behavioral risk for some investors.
- Simpler tax reporting. CD interest is straightforward 1099-INT income. Treasury phantom income (on STRIPS or TIPS) creates more complex tax situations.
What about FDIC vs Treasury in a "Treasury default" scenario?
Theoretical scenario: the U.S. Treasury defaults on its debt. In this case:
- Treasuries: principal at risk.
- FDIC-insured CDs: still nominally insured, but FDIC's backstop comes from Treasury borrowing, so the same default would impair FDIC's ability to make good.
Practically, a U.S. Treasury default would simultaneously break both Treasury-direct backing AND FDIC backing. There's no way to escape U.S. credit risk by switching from Treasuries to FDIC CDs. The two are correlated in the most extreme tail.
Bank-specific safety considerations
- "Too big to fail" banks (JPMorgan, BAC, Wells, Citi): an implicit U.S. government backing layer beyond FDIC. Above-cap deposits at these banks are widely considered safer than at smaller banks, even without explicit insurance.
- Credit unions: NCUA insurance (functionally equivalent to FDIC, same $250K cap, same backing). Some credit unions are riskier than peer banks; check rating.
- Online-only banks: FDIC coverage identical to brick-and-mortar. No additional risk from being online-only.
- Brokered CDs: FDIC coverage per ISSUING bank, not per brokerage. So a $250K brokered CD from Goldman Sachs Bank + another $250K from Wells Fargo at the same brokerage = full $500K coverage.
The MYGA dimension
MYGAs are not FDIC-insured (they're insurance contracts, not bank deposits). They're covered by state guaranty funds, typically $250K-$300K per owner per carrier, varying by state. Backing structure is different from FDIC but functionally similar: state insurance commissioners regulate the carriers, the carriers maintain capital reserves, and the guaranty fund picks up the slack if a carrier fails.
Modern-era track record: No A-rated MYGA carrier has defaulted on contractholder obligations in the past 40+ years. The handful of carrier insolvencies that have occurred (Executive Life 1991, junk-bond losses; Mutual Benefit Life 1991, real-estate losses; Penn Treaty 2017, long-term care) were resolved with state guaranty fund coverage plus voluntary rehabilitation.
For amounts above the state guaranty limit, split across multiple A-rated carriers. It's the same diversification principle as splitting cash across multiple FDIC-insured banks.
Practical safety hierarchy for retail cash above $250K
- U.S. Treasuries (direct or via ETFs): safest, unlimited coverage
- FDIC-insured CDs spread across multiple banks under cap: functionally equivalent at typical balances
- MYGAs from A-rated carriers under state guaranty cap, split across multiple carriers: very safe, with a yield premium
- "Too big to fail" bank deposits above cap: implicit backing but not explicit
- Money market funds (Treasury or government): very safe but technically not insured
- Investment-grade corporate bonds (diversified ETFs): very low default risk but uninsured
FAQ
Has the FDIC ever failed to pay?
No. The FDIC was established in 1933 and has paid 100% of insured deposits in every bank failure since. The FDIC Deposit Insurance Fund has a target ratio of 2% of insured deposits and is replenished via assessments on member banks; in extreme stress, Treasury would lend to FDIC.
Has the U.S. Treasury ever defaulted?
No, on direct Treasury debt. There was a minor technical 'default' in 1979 due to a computer glitch on small bond payments (resolved quickly). U.S. Treasury debt is the global risk-free benchmark.
Are credit union CDs as safe as bank CDs?
Yes if NCUA-insured. NCUA (National Credit Union Administration) provides identical $250K coverage per depositor per credit union per ownership category, also backed by U.S. government full faith and credit. Always verify NCUA membership before depositing.
What if I have $1M I want to keep in cash-equivalent safety?
Options: (1) U.S. Treasuries: one holding, fully covered; (2) FDIC-insured CDs across 4 banks at $250K each; (3) MYGAs from 4 A-rated carriers at $250K each; (4) Combination. Treasuries are simplest; MYGAs pay highest yield with similar practical safety.
Are brokered CDs FDIC-insured?
Yes. Per the issuing bank, not per brokerage. A brokered CD issued by Goldman Sachs Bank held at Fidelity is FDIC-insured to $250K by Goldman, separate from any other FDIC coverage you have at Goldman through other channels.
Are money market funds FDIC-insured?
No. Money market funds are securities, not deposits. They're SIPC-protected in your brokerage account (custody protection, not principal protection). In 2008, one money market fund 'broke the buck' (Reserve Primary Fund); since then, MMFs are heavily regulated to maintain $1.00 NAV but there's no insurance guarantee.
What's the safest way to hold $5M of cash equivalent?
Direct U.S. Treasuries through a brokerage. One purchase, one holding, full government backing, no cap. Tax-efficient (state-tax exempt). Alternative: a mix of MYGAs from 15-20 A-rated carriers + I-Bonds + TIPS in IRAs. More administrative work, but it captures the yield premium.
Does FDIC cover CDs from credit unions?
No. Credit unions are covered by NCUA, not FDIC. Same $250K limit, same full faith and credit backing. Coverage limits are calculated separately, so a depositor can have $250K FDIC at a bank AND $250K NCUA at a credit union without overlap.
Related reading
- T-bills explained
- T-bills vs CDs
- State tax on Treasury interest
- Treasury laddering
- All CD reviews
- Best MYGA Rates 2026
Safety is essentially equivalent. Yield isn't. See the full comparison.
Hans Goldstein, independent licensed insurance producer.
Treasuries, FDIC CDs, and MYGAs from A-rated carriers are all essentially default-free at retail balances. Where they differ is yield, tax treatment, and liquidity. For 3-10 year retirement money, MYGAs pay 100-140 basis points more than Treasuries with full tax deferral. Worth seeing the side-by-side before allocating.
Send your details and within one business day you'll get a written side-by-side: the Treasury option vs. the top 3 MYGAs from A-rated carriers at the same term, end-of-term math at your actual dollar amount, and after-tax yield computed at your state bracket. We’ll email it to you.
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Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed insurance producer appointed with multiple A-rated carriers
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Disclosure
This review reflects publicly available Treasury auction results, TreasuryDirect documentation, and approximate market yields as of the date stated above. Treasury yields change daily; current yields differ from prior auctions and may differ from those shown here. This article is general information for educational purposes; it is not a personalized recommendation, solicitation, or offer of any specific security or insurance product. U.S. Treasury securities are backed by the full faith and credit of the United States Government. MYGA references compare Treasury yields against approximate rates from A-rated insurance carriers as of the date stated; carrier rates change monthly. State guaranty fund coverage on annuities is provided by the state insurance department and varies by state (typically $250,000-$300,000 per owner per carrier). Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated annuity carriers; he is NOT a registered investment advisor, broker-dealer, or registered representative, and is not paid by the U.S. Treasury, TreasuryDirect, or any brokerage for this review. No compensation has been received from any third party in connection with this content. Always read the actual offering documents and consult a licensed advisor before purchasing any security or annuity. Tax discussion of 31 U.S.C. §3124 and Internal Revenue Code provisions reflects law as of 2026 and is subject to change.