Best IRA CD Rates of June 2024 (2024)

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.

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.

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.

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.

Right now, America First Credit Union and Navy Federal Credit Union feature rates as high as 5.25% APY and 5.30% APY, respectively. Alliant Credit Union isn’t far behind with a 5.20% APY on its 12-month jumbo CD (if you deposit $75,000 or more into your account).

An IRA CD can be a good idea if the market is unstable and you want conservative, predictable gains. They’re best for people who are nearing retirement and don’t want to risk losing a sizeable portion of their savings when it’s finally time to cash them out. For younger people, you can often realize more gains with traditional investments.