You are probably familiar with an individual retirement account, a tax-advantaged investment account that helps you save for retirement. You may also have heard of a savings account that locks in your annual percentage Yield for a set amount of time.
It's a type of account that combines these two concepts.
An IRA CD keeps your APY in your IRA for a specific amount of time and saves your money for retirement. It can be a good option for those who are approaching retirement and are looking for a safe investment option.
An IRA CD is a type of retirement account that invests your funds in a certificate of deposit. With an IRA CD, your CD is part of your long-term retirement savings strategy by investing in regular CDs, by opening a regular CD.
Most banks allow you to choose between a traditional and Roth IRA CD, and some offer SEP IRAs for individuals who are self-employed. As an IRA CD, you can follow most of the same rules as any other IRA. You have to pay taxes and penalties for withdrawals that you would with any other traditional, Roth, or SEP IRAs, and you'll pay the same taxes and penalties for early withdrawals that you would with any other traditional, Roth, or SEP IRA.
If you withdraw money from an Roth IRA CD, you can contribute after-tax dollars to the Roth IRA CD, and you won't pay taxes when you withdraw. For a traditional IRA CD and, you'll typically contribute money before taxes are taken out, then pay income tax on withdrawals.
Don't overlook the fact 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 best rates are currently at Ally Bank, Discover Bank, Synchrony Bank, and Alliant Credit Union.
The banks offer competitive rates and a variety of term lengths, and they don't charge monthly maintenance fees. The length and whether you want a SEP IRA, how much you have for an opening deposit, and whether you want a SEP IRA.
What are the advantages and disadvantages of getting an IRA CD?
As you age, your retirement savings strategy should change. If you have a significant amount of time to invest, it's likely to take on more risk than an IRA CD can provide. If you're planning to retire in the next few years, an IRA CD may be a less risky option for investing with a guaranteed rate of return.