If your IRA invests heavily in risky assets, depositing money in an IRA CD can help you diversify your portfolio. Some banks may offer more competitive rates for five-year IRA CDs, for example, but not for six-month IRA CDs. In a credit union, the National Credit Union Share Insurance Fund covers an IRA separately from the insurance coverage of your other credit union accounts. This is because the money from an IRA CD is usually invested for the long term, so the bank knows that it won't have to worry about early withdrawals.
If you don't like surprises and want to know exactly how much interest the investment will generate, a CD with a fixed-rate IRA gives you that certainty. If you're attracted to the risk-free nature of a CD, you can save on a CD without first investing your funds in an IRA. As a result, IRA credit cards can be a great way to increase your retirement savings while minimizing your tax liability. In addition to IRA CDs, America First has checking accounts, savings accounts and different types of certificates of deposit.
We'll also discuss the benefits of investing in a CD IRA and provide you with tips on how to choose the right account for your needs. Certificates of deposit charge interest penalties if they close before their expiration, and you could be subject to tax penalties if you don't reinvest the funds in another IRA. You may be more familiar with traditional IRAs, but there are other types of IRAs with different tax incentives or contribution processes. Chances are, if you're considering a CD IRA, you're planning for the long term, and in that case, long-term investments make more sense as an alternative.
If the funds are on a CD of a traditional IRA and you withdraw funds from the CD before the end of your term and before you turn 59 and a half years old, your bank may impose an early withdrawal penalty and a 10 percent early withdrawal tax. It might also be a more appropriate option because, for the most part, IRA funds consist of money that you don't plan to touch. Opening an IRA CD with Synchrony Bank can only be done over the phone, since Synchrony has no branches and doesn't offer an online application.