What Is an IRA CD?

If you’re saving for retirement, a 401(k) is usually the most popular option, however this account may not be enough.

Because of this, you should look into an IRA, an individual retirement account, or more specifically, an IRA CD.

With an IRA CD, you are able to lock in a CD-style interest rate in the form of a term-based retirement account.

Be sure to keep reading to learn more about an IRA CD is and if it’s the right option for you.

Recommended IRA CD

-Available nationwide online -Select terms as short as 3 months up to 120 months -Rates ranging from 2.00% APY up to 4.00% APY -Step-by-step help available 24/7 by phone -Flexible options: Roth (pay now, save later) & Traditional IRAs (earn now, pay later) -Gather your retirement savings into one place. -Just three steps and you’re on your way to saving with a Discover IRA CD. Apply Now at Discover

What is an IRA CD?

An IRA CD is simply an IRA where all the money is invested in certificates of deposit (CDs).

In order to understand that, let’s breakdown the two accounts that makeup an IRA CD: an IRA and a CD.

• Certificate of Deposit (CD): A CD typically offers a higher interest rate than a savings or checking account. Your money is locked in for a predetermined amount of time, known as a CD term. You will most likely have to pay a early withdrawal fee if you try to take your money out before the end of the term. CD terms can range from 3 months to 10 years, and the rate is usually higher then longer the term.
• Individual Retirement Account (IRA): An IRA is a tax-advantaged retirement account that lets you save and invest your money in a many different ways. A lot of people use IRA funds to invest in stocks and bonds, however you could also put it into money market accounts or CDs. The main advantage to IRAs is that you don’t have to pay tax on your money as it grows. You pay tax before you contribute to the account or after you withdraw from the account, depending on the type of IRA you have.

Pros of Using an IRA CD

• Secure: IRA CDs are a secure way to invest your money. As long as you open it with a FDIC-insured institution, your savings are insured for up to $250,000. Even if your financial institution fails, you’re protected up to that amount. This is not the case for other investments like stocks or bonds.
• Don’t fluctuate with the market: The rate you agree to when you open the CD is the rate you will get. That predictability can help you plan your retirement savings because you know exactly how much you’ll earn from a CD.
• Straightforward investment tool:  There isn’t a lot to consider when choosing one and it isn’t likely to make adjustments throughout its life. Investing in an IRA CD is easier and less time-consuming than designing and managing your own investment portfolio.

Cons of Using an IRA CD

• Small return: Even though CDs give you a predictable return, they provide a relatively small return. With rates that usually fall between 1% and 2%, a CD’s rate of growth is so low that it won’t always outpace inflation. If your retirement investments are mostly in an IRA CD, you won’t make as much as you would from a diverse portfolio of stocks, bonds and other investment options.
• Withdrawal penalties: If you withdraw money from a CD before it reaches full maturity (the end of its term), you will have to pay an early withdrawal penalty. The exact penalty will vary by CD and financial institution.
• IRA contribution limits: An IRA CD is also subject to the same rules as any other IRA, which means it is subject to the same IRA contribution limits. You will also pay the same taxes and penalties that you would owe for early withdrawal from an IRA (in addition to early withdrawal penalties for the individual CDs).
• High minimum investment: Another consideration is that CDs require a minimum investment. A long-term CD could have a minimum as high as $10,000. However, keep in mind that CDs with a higher minimum usually have higher yields.

Who Should and Who Should Not Invest in an IRA CD?

You should invest in an IRA CD if you are a conservative, low-risk investors who wants security against their initial capital and a guaranteed yield.

If you will retire soon or are already retired, you may want to shift some of the nest egg into an IRA CD.

You will earn a relatively low return, but that could be enough if your goal is just to secure the money you’ve already saved.

Since they offer a relatively low return, they are not ideal for younger investors or people who are just starting to save for retirement.

Individuals who have decades before they retirement are usually better served a diverse portfolio.

You should avoid this account if you will need to use the money that you invest.

Withdrawing money early from a CD is not a good idea because of the early withdrawal penalties.

Author’s Verdict

An IRA CD is a type of IRA that consists of CDs. In general, an IRA CD is a great way to invest for retirement without exposing yourself to much risk. Hopefully, after reading this post, you will know whether or not an IRA CD is right for you.

In addition, we have a list of bank promotions to get some extra cash in your pockets today. You may also want to check out savings accounts if you want to get started on saving up money.

Huntington Bank Bonuses & Promotions: $100, $400, $1,000 Checking Offers 2025

Chase Coupon Codes 2025 ($100, $200, $300, $400, $500, $700, $2000 Checking Bonuses)

Discover Bank Promotions: $150/$200 Savings Bonus, $360 Cashback Debit Bonus, Up to 4.10% APY for 2025

• 1
• 2
• 3
• ›