Editorial Note: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, hotel, airline or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post. We may earn a commission from partner links on Newsweek, but commissions do not affect our editors’ opinions or evaluations.
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By
Ariana Arghandewal
Ariana Arghandewal
Travel Expert
Ariana Arghandewal is a travel rewards expert and founder of Pointchaser.com, an award-winning blog. She has over a decade of experience writing about personal finance and travel rewards. She is passionate about helping people leverage credit cards to achieve their travel goals. Her work has appeared in numerous publications, including Bankrate, Business Insider, CNN Underscored, Forbes Advisor and Lonely Planet.
Read Ariana Arghandewal's full bio
Reviewed By
Robert Thorpe
Robert Thorpe
Senior Editor
Robert is a senior editor at Newsweek, specializing in a range of personal finance topics, including credit cards, loans and banking. Prior to Newsweek, he worked at Bankrate as the lead editor for small business loans and as a credit cards writer and editor. He has also written and edited for CreditCards.com, The Points Guy and The Motley Fool Ascent.
Read Robert Thorpe's full bio
Growing your money in a secure account is one of the most important steps to building a nest egg for retirement. Individual Retirement Accounts (IRAs) offer a tax-advantaged way to save for the golden years. And among the various investment options available within IRAs, certificate of deposit (CD) rates can be a reliable choice.
Investing in an IRA CD can be a great way to diversify your retirement savings. Whether you’re just starting out or already have an IRA, the best IRA CD rates can help you maximize your savings and ensure your retirement funds will be there when needed. In this article, we’ll discuss the best IRA CD rates and how to find one that works for you.
Our Methodology
Newsweek Vault’s banking experts have done hundreds of hours of research to present you with all the latest information about your banking options. Whether you’re interested in opening a new checking account or savings account, our research spans all the top online banks, credit unions and brick-and-mortar branches.
We assessed the following five key factors to help you choose the best account for your personal finance needs.
- Associated fees
- ATM access
- Balance requirements
- Customer service
- Interest-earning potential
Our Picks
- Best Overall: Citibank IRA CD
- Best for Large Balances: Alliant IRA CD
- Best for Short-Term Investment: Signature Federal Credit Union IRA CD
- Best for Long-Term Investment: Discover IRA CD
- Best for No Minimum Deposit: Ally IRA High Yield CD
5 Best IRA CD Rates of 2024
Best Overall
Citibank IRA CD
Vault Verified
APY
0.05% – 5.13%
Min. Deposit Requirement
$250
Term Length
3 months – 5 years
Why We Chose It
CitiBank offers traditional and Roth IRA CDs. The minimum opening deposit is a low $250, and you can earn a high APY with select terms. Read our Citibank review.
Pros
- Offers high APYs for select terms
- Low $250 minimum deposit
- Issued by a major bank accessible to most consumers
Cons
- Requires a paper application submitted in-branch or via mail
- The APY drops as low as 0.05% for shorter terms
Best for High Balances
Alliant Credit Union IRA CD
Vault Verified
APY
4.00% – 5.45%
Min. Deposit Requirement
$1,000
Term Length
3 months – 5 years
Why We Chose It
Alliant offers traditional and Roth IRA CDs but goes further to include SEP IRA CDs, which are for anyone who is self-employed. Currently, the highest IRA CD rates are for 18-month Jumbos but even 12- and 18-month rates are highly competitive. Read our Alliant Credit Union review.
Pros
- Flexible terms, ranging from three to 60 months
- Jumbo certificates require lower-than-average $75,000 deposit
- Alliant covers the $5 minimum savings balance needed to qualify for an account
Cons
- Dividends compound monthly rather than daily
- Requires Alliant Credit Union membership
Best for Short-Term Investment
Signature Federal Credit Union IRA CD
Vault Verified
Min. Deposit Requirement
$50
Term Length
12 months
Why We Chose It
Signature Federal Credit Union offers IRA and Roth IRA certificates with rates currently as high as 5.00% APY for a 12-month term. These CDs are great if you’re looking for a short-term investment with high yields.
Pros
- High APY for select terms
- Low minimum opening balance requirement of $500
- The account can be opened online
Cons
- Requires opening a Share Savings account
- Requires Signature Federal Credit Union membership
- Limited customer service hours
Best Long-Term Investment
Discover IRA CD
Vault Verified
APY
2.00% – 4.80%
Min. Deposit Requirement
$2,500
Term Length
3 months – 10 years
Why We Chose It
While some banks reserve the highest APY for short-term IRA CDs, Discover offers a generous APY on its long-term CDs. It’s a solid choice for anyone seeking competitive rates on long-term IRA CDs. Read our Discover Bank review.
Pros
- Earns competitive APYs on select terms
- Interest is compounded daily
- Discover provides 24/7 U.S.-based customer service
Cons
- Requires a $2,500 minimum deposit
- Discover is an online bank with few physical branches
Best for No Minimum Deposit
Ally IRA High Yield CD
Vault Verified
APY
3.00% – 4.65%
Min. Deposit Requirement
$0
Term Length
3 months – 5 years
Why We Chose It
Ally is an online bank known for its convenient virtual banking features and competitive rates. That extends to its IRA CD, which offers APYs ranging from 3.00% to 4.65%. But what makes this product unique is that there is no minimum deposit requirement. You can invest any amount you’re comfortable with. Read our Ally Bank review.
Pros
- No minimum deposit is required
- If rates increase within 90 days of funding, Ally applies the higher rate to your IRA CD
- Ally provides easy online tools
Cons
- High early withdrawal penalties on long-term IRA CD rates
- Ally is an online bank with no in-person branches
IRA Certificate of Deposit Overview
An IRA CD is a financial product that earns a fixed interest rate and can help you save for retirement. It combines the tax advantages of an individual retirement account (IRA) with the security and predictability of a certificate of deposit (CD).
How Do IRA CDs Work?
IRA CDs let you contribute a set amount of money to an IRA account specifically designed for CDs. The funds are then invested in CDs with set terms and interest rates. These CDs typically offer higher interest rates than regular savings accounts, and they come with a fixed maturity date, usually ranging from three to 60 months. If you attempt to withdraw funds before the IRA CD matures, you’ll likely face a penalty.
Who Should Get an IRA CD?
Consider an IRA CD if you want a low-risk, secure investment option for your retirement savings. They’re particularly appealing if you prefer guaranteed returns and are willing to lock in your money for a set period. However, they may not be the best choice if you’re looking for higher returns or more flexibility with your investments.
Pros and Cons of IRA CDs
IRA CDs can be a good option for anyone looking to save for retirement, but there are some drawbacks to consider as well.
Pros of IRA CDs
- They’re low-risk and secure: IRA CDs offer a stable and secure investment option. Your money is protected and you’ll receive a guaranteed interest rate throughout a set term. IRA CDs can be particularly ideal for risk-averse investors who still want a high return on their investment.
- Returns are predictable: With a fixed interest rate and maturity date, IRA CDs provide predictable returns. This can help you plan for retirement with more certainty, knowing exactly how much your investment will grow over time.
- They come with tax benefits: You won’t pay taxes on the interest earned from an IRA CD, and contributions made to this account are tax deductible.
Cons of IRA CDs
- Limited growth potential: IRA CDs typically offer lower interest rates than higher-risk investments like stocks. This means your returns may not keep pace with inflation, which can potentially reduce your purchasing power over time.
- Withdrawal penalties: IRA CDs carry penalties for early withdrawal before the maturity date. If you need to access your funds for an emergency, you may incur penalties from your financial institution in addition to tax liabilities.
- Opportunity cost: Tying up your money in an IRA CD could mean missing out on the potential for higher returns with other investments, like stocks or mutual funds. If your investment horizon is decades away, IRA CDs might not be the right option to build substantial wealth for retirement.
How to Choose the Best IRA CD for You
When it comes to selecting the right IRA CD for your financial goals, several factors should influence your decision.
Interest Rate and Terms
Evaluate the interest rates and terms offered by various banks and credit unions. Shorter-term CDs currently offer higher interest rates, but when your CD matures in a year or two, you’ll need to decide whether to accept a lower APY or roll over your funds into another investment account. Some institutions offer slightly more competitive long-term APYs, so you might want to compare those rates before deciding.
Penalties for Early Withdrawal
Familiarize yourself with early withdrawal penalties, as they can significantly cut into your earned interest. In addition to tax penalties, you may lose earned interest if you withdraw your funds before the term ends.
Reputation
When researching IRA CDs, you’ll want to choose a reputable financial institution. Look for institutions that have a track record of customer service, competitive rates and a solid financial standing. Make sure any institution has FDIC or NCUA insurance.
Minimum Deposit Requirements
Some banks and credit unions offer highly competitive APYs on IRA CDs, but they may also come with high minimum deposits. Be sure to compare minimum deposit requirements to help find the right IRA CD for you.
Frequently Asked Questions
What’s the Difference Between a Regular CD and an IRA CD?
A regular CD is a deposit account with a fixed interest rate and maturity date. An IRA CD is a retirement account with the same features as a regular CD, but it’s held in an IRA account. An IRA CD allows the account holder to save for retirement. Additionally, the account holder may be eligible for certain tax benefits.
When Can I Withdraw an IRA CD Without Penalty?
You can cash in an IRA CD without penalty by waiting until at least age 59½. If you withdraw the funds earlier, you’ll be subject to a penalty, though there are exceptions. One exemption is using IRA CD funds to pay your medical insurance premium after losing a job. Be sure to consult a financial advisor or tax professional for more information on cashing in an IRA CD without penalty.
What Happens When an IRA CD Reaches Maturity?
Once an IRA CD reaches maturity you can withdraw the funds without facing penalties by the age of 59½. If you haven’t reached this age yet, you can avoid penalties by either renewing your CD or transferring it to another type of IRA account. If you opt for a transfer, it must be done within 60 days to avoid taxes and penalties.
Related Articles
- Best CD Rates of April 2024: Up To 5.30%
- Best 1-Year CD Rates of April 2024
- Best Jumbo CD Rates of April 2024
- What Is a Certificate of Deposit (CD)?
Editorial Note: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, hotel, airline or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post. We may earn a commission from partner links on Newsweek, but commissions do not affect our editors’ opinions or evaluations.
Ariana Arghandewal
Travel Expert
Ariana Arghandewal is a travel rewards expert and founder of Pointchaser.com, an award-winning blog. She has over a decade of experience writing about personal finance and travel rewards. She is passionate about helping people leverage credit cards to achieve their travel goals. Her work has appeared in numerous publications, including Bankrate, Business Insider, CNN Underscored, Forbes Advisor and Lonely Planet.
Read more articles by Ariana Arghandewal
