Certificate of Deposit - IRA - Dabbler.com

Certificate of Deposit - IRA

When saving for your retirement it’s important that you make the right decisions as often as possible. IRA accounts are an important option in order to save for your retirement.

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There are serious tax benefits to depositing to your IRA as you save. Beyond that a Certificate of Deposit is an excellent way to increase the values of your IRA. IRA’s are not investments, they are purely savings. But the money in an IRA can then be invested. There are different kind of IRA’s. The traditional and the Roth IRA. With a traditional IRA you would have to pay tax on your interest and investments later when you withdraw your money. With a Roth IRA you pay your tax up front and the withdrawals are free later on.

What is an IRA CD?

A CD stands for a certificate of deposit. Certificates of deposit is a bank product. It pays higher interest than money standing alone in your IRA. However with the higher interest rate does come a tradeoff. You are unable to withdraw any of your money when you place it into a CD for a specific time frame. CD’s usually have low to moderate terms like 3-6 years. The longer you surrender your interest. So what are all the pros and cons?

Pros:

  1. Your IRA CD is completely protected up to $250,000. It’s protected by the United States Government through insurance. It’s nice to know that you’re not going to go about losing money. Considering a lot of the recent issues that have occurred in other markets.
  2. All IRA CD’s are predictable. You know the exact sum of money you’re going to make over the period of the certificate of deposit. It allows you to know exactly how much you’re going to have at the end of the term and you can plan for it.
  3. Setting up an IRA Certificate of deposit is mighty easy. It’s usually a lot easier to set up your certificate of deposits.

Cons:

  1. IRA certificates of deposit don’t really offer the best return on your investment. It’s a solid return but it doesn’t match the kind of return you can get from a balanced stock portfolio.
  2. IRA certificates of deposit don’t often do well vs. inflation. Because the rates are quite low, it’s common for a certificate of deposit to increase in value but not as much as inflation.

Best IRA CD Rates:

IRA rates will often change. Often times the better the rate, the higher the minimum amount of money required. This does make a reasonable amount of sense. Currently in 1 year CD’s you can find some of the following interest rates at some American Banks:

  1. Garden Savings FCU - 1.41%
  2. CIT Banks - 1.22%
  3. California First National Bank - 1.20%
  4. PenFed Credit Union - 1.16%
  5. DIscover Bank - 1.15%
  6. GTE Financial - 1.11%
  7. Navy FCU - 1.10%
  8. Giantbank.com - 1.06%
  9. Ally Bank - 1.05%
  10. Chevron FCU - 1.05%

Every bank offers up a rate they deem competitive but they may not all be. Shop around to find the right one for you.

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