Best IRA CD rates for July 2024

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.

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.

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.

• 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.
• For the 2024 tax year, there’s a $500 increase on annual IRA contributions and a $1,000 catch-up contribution for those 50 and older.
• Just like with any IRA, the IRS limits how much you can contribute to an IRA CD per year.

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.

Your IRA CD total balances could be at risk if they exceed $250,000 at an FDIC-insured bank or NCUA-insured credit union, should the financial institution fail. Federally-insured banks and credit unions can only insure up to $250,000 of your money – that’s per depositor, per insured financial institution, per ownership category. 

You might also lose money if you have to take an early withdrawal from the IRA CD. And withdrawals before age 59 ½ could result in a penalty from the IRS. But there are some exceptions. For instance, first-time homebuyers under age 59 ½ can withdraw up to $10,000 without paying an IRS penalty and up to $5,000 used for a qualified birth or adoption from an IRA won’t receive a 10 percent penalty.

But you also have to remember that you might incur early withdrawal penalties with your IRA CD from your financial institution. So factor this into your decision whether to get an IRA CD or an IRA savings account.

These financial institutions are featured in our CD rate research: Alliant Credit Union, Ally Bank, Amerant Bank, America First Credit Union, American Express National Bank, Axos Bank, Bank5 Connect, Bank of America, Barclays, Bask Bank, BECU (Boeing Employees Credit Union), Bethpage Federal Credit Union, BMO, Bread Financial (formerly Comenity Direct), BrioDirect, Capital One Bank, Chase Bank, CIBC USA, CIT Bank, Citibank, Citizens, Citizens Bank (Rhode Island), Comerica Bank, Customers Bank, Delta Community Credit Union, Discover Bank, Emigrant Direct, EverBank (formerly TIAA Bank), Fifth Third Bank, First Citizens Bank, First Internet Bank, First Technology Federal Credit Union, FNBO Direct, Golden 1 Credit Union, Marcus by Goldman Sachs, Morgan Stanley Private Bank, Huntington National Bank, KeyBank, Limelight Bank, Live Oak Bank, M&T Bank, MySavingsDirect, Navy Federal Credit Union, NBKC Bank, PenFed Credit Union, PNC Bank, Popular Direct, 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, Truist Bank, UFB Direct, U.S. Bank, USAA Bank, Vio Bank, VyStar Credit Union, Wells Fargo and Zions Bank.