An individual retirement account (IRA) certificate of deposit is a savings option for those looking for a guaranteed return on retirement funds.
Investing in an IRA CD is relatively easy. It’s similar to purchasing a regular certificate of deposit, but instead of using money from your checking or savings account, you transfer funds from an IRA or another retirement account.
IRA CDs are safe investments and appeal to investors who like the predictability that comes with a fixed annual percentage yield (APY). Use Bankrate’s CD calculator to see exactly how much money you will earn over the term of the IRA CD.
What is an IRA CD?
An IRA CD is an individual retirement account where your money is parked in a certificate of deposit, a time-deposit account that pays interest at a set rate in exchange for the saver agreeing to deposit cash for a set term. CD terms vary, usually ranging from three months to 10 years. CDs generally offer a higher rate than savings accounts because they are less liquid.
The best one-year IRA CD yields are nearly four times the national average of 1.45 percent APY, according to Bankrate’s national index survey of banks and thrifts from March 22, 2023.
Typically, your options are a traditional IRA or Roth IRA. The tax advantages for each are different. Bankrate’s IRA calculator can help you compute and compare potential earnings for both types.
You may want to consider getting an IRA CD if your tolerance for risk is low and you’re looking for a guaranteed return to boost your retirement savings while enjoying tax advantages. IRAs are subject to contribution limits, and not all contributions are eligible for tax savings. Check with your tax advisor if you have questions.
Of course, CDs aren’t the only investment option for those looking to put their money into an IRA. Stocks, bonds, mutual funds and money market funds are also popular options.
Bankrate’s picks for the top IRA CD rates
America First Credit Union: 3.50%-5.10% APY (3 months-5 years); $500 minimum deposit
Ally Bank: 2.00%-5.00% APY (3 months-5 years); $0 minimum deposit
Synchrony Bank: 2.25%-5.00% APY (3 months-5 years); $0 minimum deposit
Pentagon Federal Credit Union: 3.75%-4.50% APY (1-7 years); $1,000 minimum deposit
Discover Bank: 2.00%-4.75% APY (3 months-10 years); $2,500 minimum deposit
Randolph-Brooks Federal Credit Union: 3.55%-4.80% APY (6 months-7 years); $1,000 minimum deposit
Navy Federal Credit Union: 0.45%-4.50% APY (3 months-7 years); $1,000 minimum deposit
Citibank: 0.05%-4.60% APY (3 months-5 years); $250 minimum deposit
Bethpage Federal Credit Union: 2.25%-4.25% APY (3 months-5 years); $50 minimum deposit
Note: Annual percentage yields (APYs) shown are as of March 29, 2023. Rates for some products vary by region, and some APYs require higher balances than the minimum deposit. Banks are listed in order of top APYs for one-year IRA CDs with a $25,000 balance.
Which IRA CD is best for you depends on your goals. Consider the rate offered along with other factors, including the minimum deposit required and maturity date. Rates vary by the term of the CD. Some banks may offer more competitive rates on five-year IRA CDs, for example, but not for six-month IRA CDs. Consider your time horizon when deciding how best to invest.
A closer look at the top IRA CD rates
Here are Bankrate’s picks for the best IRA CD rates:
America First Credit Union: 3.50%-5.10% APY (3 months-5 years), $500 minimum deposit
America First Credit Union was founded in 1939. It has more than 1.2 million members.
In addition to IRA CDs, America First has checking accounts, savings accounts and different types of CDs.
Ally Bank: 2.00%-5.00% APY (3 months-5 years), $0 minimum deposit
Ally Bank is an online-only bank that offers more CD options than most direct banks. Ally Bank gives savers options with a High Yield CD and a Raise Your Rate CD. If you fund your IRA CD within 90 days, you’ll get its best rate for the term and balance on either the day you open or the day you fund the account. Ally Bank IRA CDs are available as a traditional, Roth and simplified employee pension (SEP) IRA.
Synchrony Bank: 2.25%-5.00% APY (3 months-5 years), $0 minimum deposit
Synchrony Bank, formerly known as GE Capital Bank, is a subsidiary of Synchrony Financial. Synchrony Bank offers Roth IRA CDs and traditional IRA CDs.
Opening an IRA CD with Synchrony Bank can only be done over the phone, as Synchrony has no branches and doesn’t offer an online application. Its corporate headquarters are in Draper, Utah.
Pentagon Federal Credit Union: 3.75%-4.50% APY (1 year-7 years), $1,000 minimum deposit
Pentagon Federal Credit Union was established in 1935. It has more than 2 million members and has its main office in McLean, Virginia.
PenFed has six terms of IRA CDs, ranging from one year to seven years. There are no early withdrawal penalties on the principal.
Discover Bank: 2.00%-4.75% APY (3 months-10 years), $2,500 minimum deposit
Discover Bank eliminated fees on its deposit products in June 2019. Interest on Discover Bank CDs is compounded daily and credited monthly. Discover Bank provides a nine-day grace period after a CD matures. Its headquarters are in Greenwood, Delaware.
Randolph-Brooks Federal Credit Union: 3.55%-4.80% APY (6 months-7 years), $1,000 minimum deposit
Randolph-Brooks Federal Credit Union was established in 1952 and has its main office in Live Oak, Texas. It serves four major markets: Austin, Corpus Christi, Dallas-Fort Worth and San Antonio. The credit union has more than 1 million members.
In addition to its range of IRA certificates with terms from six months to seven years, Randolph-Brooks offers a Really Free Checking account that requires no minimum balance and charges no monthly fee.
Navy Federal Credit Union: 0.45%-4.50% APY (3 months-7 years), $1,000 minimum deposit
Navy Federal Credit Union has more than 12 million members and is the world’s largest credit union. It has a global network of 350 branches. Navy Federal Credit Union has its main office in Vienna, Virginia.
In addition to CDs, Navy Federal Credit Union also offers checking and savings accounts, loans and credit cards.
Citibank: 0.05%-4.60% APY (3 months-5 years), $250 minimum deposit
Citibank is one of the largest banks in the U.S. It offers IRA CDs with terms ranging from three months to five years. It also has regular CDs, checking accounts and savings accounts. In certain areas, its high-yield savings account offers a competitive APY.
Bethpage Federal Credit Union: 2.25%-4.25% APY (3 months-5 years), $50 minimum deposit
Bethpage Federal Credit Union was founded 80 years ago.
Bethpage Federal Credit Union’s main office is located in Bethpage, New York. It has around 435,000 members and offers nine terms of IRA CDs. The three-month CD is the shortest term and the five-year CD is the longest term.
Besides IRA CDs, Bethpage offers regular CDs, checking accounts, savings accounts, a money market account, loans and other financial products.
Pros and cons of investing in an IRA CD
Before opening an IRA CD, weigh the pros and cons to see if it’s the right product for you.
Pros
A guaranteed return on your investment (as long as you don’t withdraw from your CD before it matures).
Your money is insured up to $250,000 as long as it is held at an FDIC-insured bank or an NCUA credit union.
You won’t have to worry about fees unless you’re penalized for tapping into your account before it matures.
Cons
If you’re younger, you may want to invest in something with the potential for a higher return.
The rate you earn may not keep up with inflation.
IRA CD risks
IRA CDs are just as safe as a regular CD, as long as they are opened at an FDIC-insured bank or an NCUA credit union and don’t surpass the insurance limits. For instance, IRAs fall in the “Certain Retirement Account” category at the FDIC. The coverage limit is $250,000 per owner on IRAs at an FDIC bank in a deposit product, such as a savings account or a CD. At a credit union, the National Credit Union Share Insurance Fund covers an IRA separately from insurance coverage on your other credit union accounts. The NCUSIF covers an IRA at a credit union up to an additional $250,000.
Use the FDIC Electronic Deposit Insurance Estimator and contact your FDIC-insured bank to confirm that your account is insured. At a credit union, use theShare Insurance Estimatorand contact your credit union to confirm your account meets insurance requirements.
IRA CD FAQs
Who are IRA CDs best for?
IRA CDs are worth considering if you’re looking to diversify your portfolio. You may have other retirement accounts with funds invested in areas where a loss of principal is possible, such as the stock market or exchange-traded funds.
That is also why IRA CDs are a good option for someone with a low risk tolerance. If you don’t like surprises and want to know exactly how much interest the investment will make, a fixed-rate IRA CD provides that certainty. As long as you hold the IRA CD to its maturity, you will earn the expected interest on the IRA CD. It’s also worth considering adding to your portfolio if you’re nearing retirement.
At a bank, the Federal Deposit Insurance Corp. (FDIC) covers up to $250,000 for the combined balance of all self-directed retirement accounts owned by the same person in the same insured bank.
At a National Credit Union Administration (NCUA) credit union, the National Credit Union Share Insurance Fund (NCUSIF) covers up to $250,000. The coverage is separate from insurance coverage on your other credit union accounts.
How do IRA CDs compare to other popular accounts?
IRA CDs vs. traditional CDs
Just like when you open a regular CD, your time horizon is very important when choosing an IRA CD. With a regular CD, withdrawing your money too early may result in an early withdrawal penalty. If the funds are in a traditional IRA CD and you withdraw from the CD both before its term is up and before you turn 59½, you may incur an early withdrawal penalty from your bank and a 10 percent early withdrawal tax.
Unlike a regular CD, contributions to a traditional IRA may be tax-deductible. But you can’t deduct contributions that you make to a Roth IRA CD.
IRA CDs vs. IRA savings accounts
An IRA CD may have a higher APY than an IRA savings account. It also might be a more appropriate option because, for the most part, IRA funds consist of money that you don’t plan on touching.
On the other hand, if you’re over 59½ and plan to make withdrawals out of your traditional IRA, then an IRA savings account might make more sense, rather than paying penalties for withdrawing from the CD early.
What types of IRAs are eligible for a CD?
Traditional IRA: To contribute, you or your spouse, if filing jointly, need to have earned income, such as from employment. Contributions may be tax-deductible if you qualify, and any taxes are deferred until you begin making withdrawals in retirement.
Roth IRA: Just as with a traditional IRA, to contribute, you (or your spouse, if filing jointly) need to have earned income, such as from employment. There is no tax-deductibility on contributions and there are income limits on being able to contribute directly to a Roth IRA. Your contributions can be withdrawn tax-free and penalty-free at any time, but any investment earnings withdrawn in retirement are tax-free.
Where can you buy an IRA CD?
Your IRA is a basket for your investments, and you get to decide what to invest in. Not all financial institutions offer CD IRAs, so you will need to find one that does.
Make sure you shop around. Look for institutions that offer competitive CD rates, and pay attention to minimum balance requirements.
When choosing an IRA CD, keep your time horizon top of mind. The biggest risk with a CD is accessing your money before the CD’s term ends. Generally, institutions will charge you a penalty if you withdraw money before the CD’s maturity date.
Overall, CDs are a safe place to stash your money. They are insured up to $250,000 at banks by theFDIC and at credit unions by theNCUSIF.
What are the contribution limits for an IRA?
The IRS limits how much you can contribute to your IRA annually. For 2023, those under age 50 can contribute up to $6,500 annually in a traditional or Roth IRA. Savers 50 and older can contribute up to $7,500.
Just like with any IRA, the IRS limits how much you can contribute to an IRA CD per year.
Is an IRA CD tax-deductible?
You may be able to deduct some or all of your contributions to a traditional IRA. There are exceptions. For instance, if you exceed a certain income, your contribution may have limited deductibility or not be deductible at all.
Roth IRA contributions aren’t deductible. You don’t report the Roth IRA contributions on your tax return either.
Can I transfer an IRA CD to another bank?
Yes, you can. A trustee-to-trustee transfer is one way to move your IRA CD from one bank to another. Here, you won’t touch the money: Your bank with the maturing CD will send money to your new bank provider. Before moving your money, make sure that your CD has matured in order to avoid potential early withdrawal penalties.
If you are nearing retirement and want your money to be more liquid, consider transferring the IRA CD to an IRA savings account or to an IRA money market account instead of another IRA CD. Check with your bank to make sure the funds don’t have to be in this IRA savings account or IRA money market account for a certain period.
What is the penalty for early withdrawal of an IRA CD?
Like with any other CD, you will typically pay a penalty if you withdraw your money before an IRA CD matures.
Also, if you withdraw before age 59½ from a traditional IRA CD, you may be subject to pay an additional 10 percent tax on early distributions. The IRS will make exceptions. If the IRA CD term expires within a traditional IRA, you can keep those funds in the IRA but use them to make other investments.
How do you use an IRA CD to avoid penalties?
To effectively use an IRA CD, fund it with money you won’t likely need until after age 59½. This strategy will help you avoid an IRS additional tax.
If your IRA is heavily invested in risk assets, parking money in an IRA CD can help you diversify your portfolio. With an IRA CD, you will get a guaranteed return and tax benefits.
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Methodology for Bankrate’s Best CD Rates
At Bankrate, we strive to help you make smarter financial decisions. We follow strict guidelines to ensure that our editorial content is unbiased and not influenced by advertisers. Our editorial team receives no direct compensation from advertisers and our content is thoroughly fact-checked to ensure accuracy.
Bankrate regularly surveys around 70 widely available financial institutions, made up of the biggest banks and credit unions, as well as a number of popular online banks.
To find the best CDs, our editorial team analyzes various factors, such as: annual percentage yield (APY), the minimum needed to earn that APY (or to open the CD) and whether or not it is broadly available. All of the accounts on this page are insured by the Federal Deposit Insurance Corp. or the National Credit Union Share Insurance Fund.
When selecting the best CD for you, consider the purpose of the money and when you’ll need access to these funds to help you avoid early withdrawal penalties.
Banks we monitor
These financial institutions are featured in our savings rate research: Alliant Credit Union, Ally Bank, Amerant Bank, America First Credit Union, American Express National Bank, Axos Bank, Bank5 Connect, Bank of America, Bank of the West, Barclays, Bask Bank, BECU (Boeing Employees Credit Union), Bethpage Federal Credit Union, BMO Harris Bank, Bread Financial (formerly Comenity Direct), BrioDirect, Capital One Bank, Chase Bank, CIBC USA, CIT Bank, Citibank, Citizens, Citizens Bank (Rhode Island), Credit One Bank, Comerica Bank, Customers Bank, Delta Community Credit Union, Discover Bank, Emigrant Direct, Fifth Third Bank, First Citizens Bank, First Internet Bank, First Technology Federal Credit Union, FNBO Direct, Golden 1 Credit Union, Huntington National Bank, Investors Bank, Investors eAccess, KeyBank, Limelight Bank, Live Oak Bank, M&T Bank, Marcus by Goldman Sachs, Morgan Stanley Private Bank, MySavingsDirect, Navy Federal Credit Union, NBKC Bank, PenFed Credit Union, PNC Bank, Popular Direct, PurePoint Financial, Quontic Bank, Randolph-Brooks Federal Credit Union, Regions Bank, Salem Five Direct, Sallie Mae Bank, Santander Bank, SchoolsFirst Federal Credit Union, Security Service Federal Credit Union, State Employees’ Credit Union, Suncoast Credit Union, Synchrony Bank, TD Bank, TIAA Bank, U.S. Bank, UFB Direct, Union Bank (California), USAA Bank, Vio Bank, VyStar Credit Union, Wells Fargo and Zions Bank.
