An IRA CD is a conservative investment account for people nearing retirement (2024)

Affiliate links for the products on this page are from partners that compensate us and terms apply to offers listed (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate banking products to write unbiased product reviews.

The information for the following product(s) has been collected independently by Business Insider: Discover® IRA CD. The details for these products have not been reviewed or provided by the issuer.

  • An IRA certificate of deposit is a type of retirement investment account.
  • Traditional, Roth, and SEP IRA CDs follow the same guidelines and restrictions as any other IRA.
  • IRA CDs could be a worthwhile option if you're nearing retirement and looking for a safe investment.
  • See Insider's list of the best CD rates»

You're probably familiar with an individual retirement account (IRA), a tax-advantaged investment account that helps you save for retirement. You also may have heard of a certificate of deposit (CD), a savings account that locks in your Annual Percentage Yield (APY) for a set amount of time.

But what's an IRA CD and where can you find the best IRA CD rates? It's a type of account that combines these two concepts.

What is an IRA CD?

An IRA CD locks in your APY for a set amount of time and saves your money specifically for retirement. It can be an option worth considering for people who are getting close to retirement and are looking for a safe way to invest their money.

How an IRA CD works

An IRA CD is a type of retirement account that invests your funds in a certificate of deposit (CD). When you open a regular CD, you're putting away money for the near future — with an IRA CD, your CD is part of your long-term retirement savings strategy.

Most banks allow you to choose between aTraditional and Roth IRA CD, and some offer SEP IRAs for people who are self-employed. An IRA CD follows most of the same rules as any other IRA. You're limited to a certain amount in contributions per year, and you'll pay the usual taxes and penalties for early withdrawals that you would with any other Traditional, Roth, or SEP IRA.

This means you'll contribute after-tax dollars to a Roth IRA CD, and you won't pay taxes when you withdraw money. For a Traditional IRA CD and SEP IRA CD, you'll typically contribute money before taxes are taken out, then pay income tax on withdrawals.

Where can you open an IRA CD?

Don't assume that just because a bank offers a CD, it also has IRA CDs — it isn't all that common. Of the banks that do offer IRA CDs, the most competitive rates are currently at banks like Synchrony Bank, and Alliant Credit Union.

Ally (Member FDIC)Discover (Member FDIC)Synchrony (Member FDIC)Alliant (Federally Insured by the NCUA)
Term length3 months - 5 years3 months - 10 years3 months - 5 years1 year - 5 years
Type of IRA CDsTraditional, Roth, SEPTraditional, RothTraditional, RothTraditional, Roth, SEP
Annual Percentage Yield (APY)3.00% to 4.85%2.00% to 4.70%0.25% to 4.90%4.00% to 5.15%
Minimum deposit$0$2,500$0$1,000
Learn more

Start Saving

Learn moreLearn more

These banks offer competitive rates and a variety of term lengths, and they don't charge monthly maintenance fees. Your choice may come down to what term length you want, how much you have for an opening deposit, or whether you want a SEP IRA.

Should you get an IRA CD?

Here are some of the advantages and disadvantages to consider when getting an IRA CD:

Generally, your retirement savings strategy should change as you approach retirement. If you havea significant number of years left to invest, you'll likely want to take on more investing risk than an IRA CD can provide. If you're retiring in the next few years, however, an IRA CD can be a less risky option for investing with a guaranteed rate of return.

Laura Grace Tarpley, CEPF

Personal Finance Reviews Editor

Laura Grace Tarpley (she/her) is an expert in mortgage rates, refinance rates, lenders, bank accounts, and borrowing and savings tips for Personal Finance Insider. She worked on Business Insider's "The Road to Home" series, which won a Silver award from the National Associate of Real Estate Editors.She has written about personal finance for over seven years. Before joining the Business Insider team, she was a freelance finance writer for companies like SoFi and The Penny Hoarder, as well as an editor at FluentU.

Top Offers From Our Partners

An IRA CD is a conservative investment account for people nearing retirement (2)

SoFi Checking and Savings Earn up to 4.60% APY on savings balances and up to a $300 bonus with qualifying direct deposit. FDIC Insured.

There is no minimum direct deposit amount required to qualify for the 4.60% APY for savings. Members without direct deposit will earn up to 1.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet. To earn the $300 bonus, the customer must complete a direct deposit with a minimum initial deposit of $250 in a new SoFi Checking and Savings account within 45 days of clicking to qualify (offer expires 12/31/24).

An IRA CD is a conservative investment account for people nearing retirement (2024)

FAQs

An IRA CD is a conservative investment account for people nearing retirement? ›

With a CD, you invest your savings for a set amount of time—whether for six months or six years. During that time, you earn consistent interest. An IRA CD is a lower-risk retirement account containing a certificate of deposit account. IRA CDs are often offered by banks, credit unions, and financial institutions.

Is an IRA CD a good idea? ›

An IRA CD is a safe, FDIC-insured investment that combines the tax benefits of a traditional or Roth IRA with the predictable interest income of a certificate of deposit (CD). However, IRA CDs aren't the best choice for everyone and may be too conservative for many.

What happens to an IRA CD when it matures? ›

If you don't make any changes to your IRA CD when it matures, it will likely be automatically renewed for the same term. Can I add more money to an IRA CD? You typically cannot add money to an IRA CD after an initial deposit.

What is the difference between a traditional CD and an IRA CD? ›

Shawn Valco, CFP®, former financial advisor, explains that the difference between regular CDs and IRA CDs is that with regular CDs, interest you earn is taxable in the year you receive it. Valco notes that with Traditional IRA CDs, tax on interest is deferred, allowing more money to stay in the IRA.

Can you withdraw money from an IRA CD? ›

Although it's possible to withdraw your money from a CD before the maturity date, you'll be assessed an early withdrawal penalty for doing so. If you're withdrawing your money to invest in something with a better interest rate, the penalty could negatively affect the benefits of switching to another investment.

Do you pay taxes on IRA CD interest? ›

If traditional IRAs invest in CDs, taxes on CDinterest and gains can be deferred until distributions occur. In the case of CDs held by Roth IRAs, income and gains from the CDs—as well income and gains from other investments—can be distributed tax-free.

Which bank has the highest IRA CD rates? ›

Best IRA CD Rates
  • NASA Federal Credit Union IRA CD: 4.00% to 5.35% APY.
  • Alliant Credit Union IRA CD: 4.00% to 5.15% APY.
  • Synchrony IRA CD: 0.25% to 5.15% APY.
  • Wells Fargo IRA CD: 0.01% to 5.01% APY.
  • Consumers Credit Union IRA CDs: 0.50% to 5.00%APY.
  • Connexus Credit Union IRA Share Certificates: 3.41% to 4.91% APY.

Can you transfer an IRA to a CD without paying taxes? ›

Also, note that rollovers need to be like-kind to avoid any tax consequences. If you have a traditional 401(k) and you want to roll it into a Roth IRA CD, for instance, the IRS requires you to pay taxes on the amount that you're converting.

How much tax do you pay on an IRA withdrawal at age 70? ›

Roth IRA withdrawals represent exceptions. They are tax-free if taken after age 59 1/2 and the account has been open for at least five years.

Can you hold CDs in an IRA account? ›

Yes, you can buy CDs in your IRA through a bank. You can also buy share certificates in your IRA through a credit union. Owning a certificate in an IRA is a good option for risk-averse investors looking to preserve capital and earn a steady return.

Are IRA CDs FDIC insured? ›

IRA CDs are a secure way to invest your money. So long as you open an IRA CD with an FDIC-insured institution, your savings are insured for up to $250,000. Even if your financial institution fails, you're protected up to that amount.

Can I move my IRA CD to another bank? ›

To start with one IRA CD and end up with a different institution holding your IRA CD, you'll need to complete or close the first CD in an early withdrawal, roll over those funds, then open a new CD. Once you do this, you'll need the information for your new IRA in order to complete the transfer.

Is a RMD required for an IRA CD? ›

Once you reach age 73, you are responsible for a required minimum distribution (RMD) each year. We will not make a withdrawal from your account unless you make a specific request. We offer services to schedule your payment automatically.

How much can you put in IRA CD? ›

But IRA CDs have contribution limits. If you are under age 50 and earn taxable compensation, you could contribute up to $6,000 in 2022. Individuals 50 or over could contribute up to $7,000. For the 2023 tax year, you can contribute $6,500, or $7,500 if you're 50 or over.

Should I put my retirement money in a CD? ›

If you have a low risk tolerance, CDs might be for you. CDs grow your money slowly but steadily. They're best if you want to stash your money away for one to five years and you want a traditional savings option that's very low risk.

References

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Fredrick Kertzmann

Last Updated:

Views: 6277

Rating: 4.6 / 5 (46 voted)

Reviews: 93% of readers found this page helpful

Author information

Name: Fredrick Kertzmann

Birthday: 2000-04-29

Address: Apt. 203 613 Huels Gateway, Ralphtown, LA 40204

Phone: +2135150832870

Job: Regional Design Producer

Hobby: Nordic skating, Lacemaking, Mountain biking, Rowing, Gardening, Water sports, role-playing games

Introduction: My name is Fredrick Kertzmann, I am a gleaming, encouraging, inexpensive, thankful, tender, quaint, precious person who loves writing and wants to share my knowledge and understanding with you.