An Individual Retirement Account Certificate of Deposit (IRA CD) is a type of savings account used to save for retirement. They are similar to traditional CDs in that they offer a fixed interest rate for a fixed term; however, they have some additional features that make them particularly attractive for retirement savings.
How an IRA CD works
To open an IRA CD, you must have an Individual Retirement Account (IRA). IRAs usually offer tax advantages, and there are two main types: traditional and Roth. With a traditional IRA, contributions are tax-deductible, but withdrawals during retirement are taxed as income. With a Roth IRA, contributions are made with after-tax dollars, but withdrawals during retirement are tax-free.
Once you have an IRA, you can open an IRA CD by selecting a term and interest rate. The terms range from a few months to several years and have a fixed interest rate for earning called the Annual Percentage Yield. These investments are preferred by those wanting stability because you will know exactly how much interest you will earn.
Benefits of IRA CDs
There are so many reasons to open an IRA CD. In addition to the benefits mentioned in the introduction, they offer several other advantages for retirement savings. This includes:
Tax-deferred growth: One of the main benefits of IRA CDs is that they offer tax-deferred growth. The interest you earn on your investment is not taxed until you withdraw it in retirement. It makes financial sense for individuals expecting to be in a lower tax bracket once they stop being employed.
Easy to open and manage: Opening and managing an IRA CD is generally a simple process. Once your IRA CD is open, you don’t need to do anything to manage it. The interest will be credited to your account automatically, and you can withdraw the funds penalty-free at maturity.
Flexible withdrawal options: While most financial experts recommend leaving your money in an IRA CD until maturity, there are flexible withdrawal options if necessary. You may be subject to an early withdrawal penalty, so try to avoid it as much as possible. Either way, it’s a relief to know it’s there in case of an emergency.
How IRA CDs can diversify your savings portfolio
IRA CDs can be a substantial part of a diversified retirement savings portfolio. They present stability and are generally low risk. At the same time, they may not offer the same growth potential as other investments, such as stocks or mutual funds. Including IRA CDs in your retirement savings plan can create a healthy balance between risk and potential returns.
Investing in an IRA CD is an excellent option for those looking to grow their retirement savings in a stable, low-risk investment vehicle. With an Achieva 36-month IRA CD, you can achieve your retirement savings goals in no time without chasing rates. Take advantage of our limited-time offer and get 4.30% APY* to build your savings fast.
In conclusion, as with any investment, it is essential to carefully consider your options. Make sure to consult with a certified financial counselor before making any asset decisions.