Not all savings vehicles work the same way when it comes to taxes—and the differences can have a real impact on your retirement income. This article explains how four common types of fixed-income and savings assets are taxed: Multi-Year Guaranteed Annuities (MYGAs), I Bonds, certificates of deposit (CDs), and Treasury securities. It also covers how to think about each one inside your Boldin plan.

A MYGA is a type of fixed annuity that earns a guaranteed interest rate over a set term—similar to a CD, but with some important tax differences.

Tax deferral while it grows

One of the biggest advantages of a MYGA is that you don't owe taxes on the interest each year. The interest compounds tax-deferred until you take money out. This can make a meaningful difference in how quickly the balance grows, especially over a multi-year term.

Ordinary income when you withdraw

When you do take distributions, the interest is taxed as ordinary income at your current marginal rate—not at the lower capital gains rates that apply to some other investments.

Qualified vs. non-qualified accounts

Watch the early withdrawal penalty

If you withdraw money from a non-qualified MYGA before age 59½, you may owe a 10% federal penalty on the taxable portion, in addition to regular income tax. Most MYGAs also have surrender charges from the insurance company during the contract term—separate from the IRS penalty.

In your Boldin plan: MYGAs are typically entered as annuities or fixed-income assets. If yours is non-qualified, note that the tax treatment differs from qualified accounts, and your plan should reflect the correct account type so projected tax estimates are accurate.

I Bonds are savings bonds issued by the U.S. Treasury that earn interest based on a combination of a fixed rate and an inflation adjustment. They have a unique tax profile.

Federal tax only—no state or local tax

I Bond interest is subject to federal income tax as ordinary income, but it's exempt from all state and local income taxes. That exemption is built in at the federal level regardless of where you live.

You choose when to pay the tax

This is what makes I Bonds stand out. You have two options:

The education exception

If you use I Bond proceeds to pay for qualified higher education expenses, you may be able to exclude the interest from federal tax entirely—provided your income falls within IRS limits in the year you redeem. This exclusion phases out at higher income levels, so it's worth checking the current thresholds if education funding is part of your plan.

In your Boldin plan: I Bonds are typically modeled as Other Assets. Because the interest isn't taxed until you redeem, years when your taxable income is lower—like early retirement, before Social Security or RMDs begin—may be an efficient time to cash them in. You can use Boldin's scenario tools to test the tax impact of redeeming in different years.

CDs are straightforward from a tax perspective, but that simplicity has a downside: you owe taxes every year, even if you don't touch the money.

Annual taxation, no deferral

Unlike MYGAs or I Bonds, CD interest is taxed in the year it's earned—even if the interest is automatically reinvested or rolled over. Each January, your bank will send a 1099-INT reflecting the interest earned in the prior year.

Ordinary income, subject to state tax

CD interest is taxed as ordinary income at the federal level and is also subject to state income taxes (unlike I Bonds and Treasuries, which are state-exempt). If you live in a state with no income tax, this distinction doesn't matter today—but it's worth keeping in mind if your situation changes.

Timing matters for retirement planning

If you hold CDs in a taxable brokerage account during your working years, that interest adds to your current income and is taxed at your current marginal rate. If you're approaching retirement and expect your income to drop significantly in the first few years before Social Security or RMDs begin, that "tax valley" may be a more efficient period to hold income-generating assets like CDs.

In your Boldin plan: CDs held in taxable accounts will generate income that flows into your annual tax projections. If you're modeling a transition to retirement, it's worth running scenarios to see how CD interest affects your taxable income across different years—especially in the years before other income sources kick in.

Treasury securities—T-Bills, Treasury Notes, Treasury Bonds, and TIPS—are issued by the U.S. federal government. They share some tax features with I Bonds but differ in important ways.

Federal tax, no state or local tax

Like I Bonds, Treasury securities are exempt from state and local income taxes. Interest is subject to federal income tax as ordinary income.

No deferral (except for I Bonds and EE Bonds)

This is a key distinction: most Treasury securities do not offer tax deferral. You generally pay federal tax in the year you receive the interest.

I Bonds and EE Bonds are the exceptions

Savings bonds (I Bonds and EE Bonds) are the only Treasury securities that allow true tax deferral. All other Treasuries require you to report interest in the year it's received.

State-tax exemption makes Treasuries more efficient than CDs in taxable accounts

If you're comparing Treasuries to CDs in a taxable brokerage account, the state-tax exemption gives Treasuries an edge—even if the headline interest rate looks similar. The after-tax yield may be meaningfully higher for people in higher state income tax brackets.

In your Boldin plan: Treasury interest in taxable accounts flows into your annual income and affects your tax projections, much like CD interest. If you're considering Treasuries as a "safe bucket" for near-term expenses in retirement, run the scenario comparison in Boldin to see how the interest income affects your projected tax bracket in those early retirement years.

This article is educational and intended to help you understand how these assets are generally taxed. Tax rules can be complex and change over time. For questions about your specific situation, we recommend consulting a qualified tax professional or CPA. Boldin is not a tax advisor.