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People often associate individual retirement accounts with stock or bond investments. However, in the process of seeking the best investment, IRA account holders often overlook certificates of deposit more often than high-yield savings accounts or even checking accounts.
It’s easy to see why some holders ignore CDs and instead gravitate toward stock investments. For investors wary of putting their retirement funds in the sometimes volatile stock market, buying IRA CDs can be a source of safe returns.
Best IRA CD Rates for June 2024
CDs often deliver interest rates below 1%, but with a little research, you can find rates far exceeding that amount. Here are seven banks and credit unions that offer attractive IRA CD rates:
- Alliant Credit Union| Up to APY; $1,000 minimum deposit
- Ally Bank| Up to APY; $0 minimum deposit
- America First Credit Union| Up to APY; $500 minimum earning balance
- Connexus Credit Union| Up to APY; $5,000 minimum deposit
- Discover® Bank, Member FDIC| Up to APY; $2,500 minimum deposit
- PenFed Credit Union| Up to APY; $1,000 minimum deposit
- Synchrony Bank| Up to APY; $0 minimum deposit
Alliant Credit Union
The Alliant Credit Union IRA certificate — the credit-union version of a CD — offers competitive rates regardless of terms or deposit amounts. Depositors earn up to APY.
Minimum Deposit
Alliant Credit Union requires a minimum deposit of $1,000. If you want to tap into a jumbo CD, you’ll need to deposit at least $75,000.
Term Options
Alliant offers IRA CD terms between three and 60 months.
Penalties for Early Withdrawal
For terms of 17 months or less, the early withdrawal penalty is equal to the number of days the certificate is open, up to 90 days. For CD terms of 18 to 23 months, the early withdrawal penalty is equal to the number of days the certificate is open, up to 120 days. For CD terms of 24 to 60 months, the early withdrawal penalty is equal to the number of days the certificate is open, up to 180 days.
Pros and Cons
Pros
- The $1,000 minimum deposit should make it affordable to most depositors
- The maximum APY stands out over most competing CDs
- NCUA-insured
Cons
- Steep early withdrawal penalties
- No short-term CDs
Ally Bank
As with most CDs, the Ally Bank IRA CD tends to offer higher rates for longer commitments, but these rates do decrease with Ally past a certain point. Ally’s IRA CD rates top out at APY for a 12-month term, while it offers terms between three and 60 months.
Minimum Deposit
Ally stands out by not requiring a minimum deposit.
Term Options
Ally offers CD terms of three months to five years.
Penalties for Early Withdrawal
For CDs with terms of less than 24 months, the early withdrawal penalty is equal to 60 days of interest. For CDs with terms of 25 to 36 months, the early withdrawal penalty is equal to 90 days of interest. For CDs with terms of 37 months to 48 months, the early withdrawal penalty is equal to 120 days of interest. For CDs with terms of 48 months or longer, the early withdrawal penalty is equal to 150 days of interest.
Pros and Cons
Pros
- No minimum deposit requirement
- High rates, especially for short-term CDs
Cons
- No physical branch locations
America First Credit Union
Membership in America First Credit Union is limited to residents of certain parts of Idaho, Nevada, Utah, Arizona, Oregon and New Mexico. But eligible individuals can earn outstanding rates on CD terms of three to 60 months. CDs with terms of six to 11 months earn APY.
Minimum Deposit
In order to earn interest, you’ll need to make a minimum deposit of $500. Each member is limited to a deposit total of $100,000 across their CDs with this credit union.
Term Options
American First Credit Union offers terms of three months to five years.
Penalties for Early Withdrawal
For CD terms of 12 months or less, the early withdrawal penalty is equal to 60 days of dividends. For terms of more than 12 months, the early withdrawal penalty is equal to 180 days of dividends. The minimum penalty amount is $5.
Pros and Cons
Pros
- Competitive CD rates, especially on short-term CDs
- Wide range of CD terms
Cons
- Membership is limited to residents of some parts of Idaho, Nevada, Utah, Arizona, Oregon and New Mexico
- Limited to keeping $100,000 across all CDs you hold with this financial institution
Connexus Credit Union
Connexus Credit Union offers excellent IRA certificate rates, and anyone can join. Although term choices are limited to 12 to 60 months, the APY rate for the 12-month CD is well worth the $5,000 minimum deposit. The rate jumps to APY for a jumbo certificate, which requires a $100,000 minimum deposit.
Minimum Deposit
Connexus Credit Union requires a minimum deposit of $5,000 for its IRA Share Certificates. If you want to open a jumbo CD, the minimum deposit requirement is $100,000.
Term Options
You’ll find CD terms ranging from 12 to 60 months with this credit union.
Penalties for Early Withdrawal
For terms of 12 to 60 months, the early withdrawal penalty is equal to 180 days worth of dividends.
Pros and Cons
Pros
- Anyone in the U.S. can join this credit union
- Competitive rates
- Bump-up rates available
Cons
- Relatively high minimum deposit requirement
- No short-term CDs available
Discover Bank
The Discover® Bank IRA CD offers both short- and long-term CDs, from three months to 10 years. Those who opt for the 12-month term will receive the top APY of .
Minimum Deposit
Discover Bank requires a minimum deposit of $2,500.
Term Options
You can find CD terms from three months to 10 years with Discover Bank.
Penalties for Early Withdrawal
For CDs of less than one year, the early withdrawal penalty is three months’ worth of simple interest. For CDs of one year to less than four years, the early withdrawal penalty is six months’ worth of simple interest. For CDs of four years to less than five years, the early withdrawal penalty is nine months’ worth of simple interest. For CDs of five years to less than seven years, the early withdrawal penalty is 18 months’ worth of simple interest. For CDs of seven to 10 years, the early withdrawal penalty is 24 months’ worth of simple interest.
Pros and Cons
Pros
- Wide range of CD terms
- Competitive rates for some terms, especially 12-month CDs
Cons
- Minimum deposit requirement of $2,500
PenFed Credit Union
Pentagon Federal Credit Union is America’s second-largest, and you don’t have to be in the military or work for the Department of Defense to join.
Minimum Deposit
Members can open an IRA certificate with a $1,000 minimum deposit and earn up to APY.
Term Options
PenFed IRA certificates are available for terms of 12 months to seven years.
Penalties for Early Withdrawal
For CDs with terms of larger than six months, the early withdrawal penalty is equal to 30% of what would have been earned if the certificate was held to maturity. But the penalty won’t exceed the total dividends earned. If you withdraw funds within the first year, you’ll forfeit all earned dividends.
Pros and Cons
Pros
- Attractive rates
- Reasonable minimum deposit
Cons
- Steep early withdrawal penalty
Synchrony Bank
The Synchrony Bank IRA CD is similar to its peers in many respects. It pays as little as APY for a three-month CD, but other terms offer higher APYs, depending on what you select. Rates top out at APY for a nine-month CD.
Minimum Deposit
You won’t have to meet a minimum deposit requirement with Synchrony Bank.
Term Options
Synchrony Bank offers CD terms ranging from three months to five years.
Penalties for Early Withdrawal
For CDs with terms of 12 months or less, the early withdrawal penalty is equal to 90 days of simple interest. For CDs with terms of more than 12 months and less than 48 months, the early withdrawal penalty is equal to 180 days of simple interest. For CDs with terms of 48 months or more, the early withdrawal penalty is equal to 365 days of simple interest.
Pros and Cons
Pros
- Competitive rates
- No-penalty CD option
- Wide range of terms available
Cons
- No physical branch locations
What Is an IRA CD?
An IRA CD is simply an individual retirement account that invests all of its funds in certificates of deposit. IRA holders can put some or all of their money in a CD, and some banks have CDs they designate specifically for retirement savings.
How Do IRA CDs Work?
An IRA CD is a type of retirement account that allows you to grow your funds through a certificate of deposit. For retirement savers who want to lock in predictable returns, an IRA CD might be the right fit. Throughout your savings journey, your funds will grow through interest payments. You won’t have to pay income tax on this growth until you withdraw the funds in retirement.
Pros and Cons of IRA CD
Every investment has advantages and disadvantages. Below is a look at the pros and cons.
Pros
- Predictable returns: Like other types of CDs, you can lock in a predetermined interest rate to grow your funds over a set period of time.
- Tax advantages: You can tuck your funds away for tax-deferred growth.
- Limited fees If you don’t withdraw your funds early, you likely won’t face too many fees with an IRA CD.
Cons
- Inflation might outpace returns: The predictable returns might be lower than inflation, which cuts into your spending power.
- Early withdrawal penalties: If you need to withdraw your funds early, expect to forfeit some of your interest earnings.
Is an IRA CD a Good Investment?
In times of low interest rates, IRA CDs for low-risk investors probably won’t provide the level of growth needed to fund your retirement. However, rates have been on the rise over the past year, and they could increase further.
You probably don’t want to put all your retirement money into an IRA CD, but it’s fine to keep a portion of it in one. If you know you won’t need to touch the money for several years, it’s not a bad idea to put part of your IRA into a CD.
Final Take
An IRA CD could be the tool you’ve been looking for to kickstart your retirement savings journey. As you consider your IRA CD options, take the time to shop around for the best available CD rates.
FAQ
If you're considering an IRA CD, it's important to learn how they work. These questions might resolve some of the confusion.
- What types of IRAs are eligible for CDs?
- All types of IRAs allow CDs as an investment option.
- Who do IRA CDs best serve?
- IRA CDs for low-risk investors are best suited for those who are near retirement and need to keep their funds safe but also want a higher level of return than a standard savings account.
- What is the contribution limit on an IRA CD?
- IRA CDs have the same contribution limits as other types of IRAs. For 2024, that contribution limit is $7,000 per year for everyone under 50 years old. Those who are 50 or older can contribute up to $8,000 per year, an extra $1,000 above the threshold.
- What is the difference between a CD and an IRA CD?
- An IRA CD offers a tax-advantaged way to save for retirement. Regular CDs require savers to pay tax on the interest earned in your CD the year you receive it. In contrast, a traditional IRA CD allows you to defer paying taxes on the interest earned.
- Is interest on IRA CDs taxable?
- A traditional IRA CD is a tax-advantaged retirement account. As your CD earns interest, you won't be required to pay taxes on the earnings in a given year. However, you will pay income tax on the interest earnings when you withdraw the funds.
- Are IRA CDs FDIC Insured?
- If you work with an FDIC-insured institution to open your CD, then your funds will be protected for up to $250,000.
- What happens when an IRA CD matures?
- When an IRA CD matures, you have the option to renew your CD term length. With that, your funds will be moved into a new CD to continue earning interest.
Will Healy and Daria Uhlig contributed to the reporting for this article.
Rates are subject to change; unless otherwise noted, rates are updated periodically. All other information on accounts is accurate as of June 17, 2024.
Rates may vary by region. To verify rates in your area, check the bank’s website for details.
Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.
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