The Best IRA CD Rates

Maybe you’ve already started saving for retirement or perhaps you’re still exploring your options. Either way, an IRA CD may be something for you to consider to diversify your investments or prepare for retirement. If you’re unfamiliar with IRA CDs, here’s the gist: an IRA CD is a way to invest the funds from your tax-advantaged retirement account, or your IRA, in certificates of deposit, or CDs. It’s a lower-risk way of investing the money in your IRA, because if you invest in FDIC-backed CDs, the money you invested will provide guaranteed returns. Let’s take a closer look at IRA CDs to see who the top providers are, how much your money will earn and whether this type of investment is right for you.

Compare IRA CD rates

Bank1-year APYMinimum DepositBest Feature
Alliant1.88%$1,0002x raise your rate option
Ally2.00%$0Raise your rate option
Discover2.00%$2,500Robust savings tools
Capital One2.00%$0IRA savings account included
Synchrony2.00%$2,000High APY, low minimum investment
TIAA Bank2.05%$1,000Yield Pledge option

What is an IRA CD?

An individual retirement account (IRA) certificate of deposit (CD) is simply an IRA that is invested into a CD. An IRA is an account that is set aside specifically for retirement. A CD typically offers higher interest rates than other types of accounts, but in turn, you’re required to leave the money sitting in the CD account for a predetermined amount of time. Twelve months is average, although the time requirement can be as short as three months or as long as 10 years. In most cases, the longer the money sits in the CD, the higher the interest rate (and earnings).

The main benefit of an IRA is that you do not pay taxes on your money as your investment grows, and that includes investments made in CDs. Both traditional IRAs and Roth IRAs are eligible to be invested in an IRA CD, and most banks will even set you up with an IRA savings account, making it easy for you to set aside another chunk of money that you can invest later on.

Top IRA CD Providers

Alliant

Current 1-year APY: 1.88%

Alliant is a credit union, not a bank, which comes with pros and cons. As with all credit unions, you have to be a member of Alliant to invest your money with them, but they offer higher interest rates in return. In order to open an IRA CD, you must fill out an application and mail it in or visit a branch. You can apply for a regular savings account online, though, and you’ll need it. A CD of any kind cannot be opened with Alliant unless you have a trust or savings account with them, and it must have at least a $5 balance. The extra effort of opening the account may be worth it, though. Alliant offers a 2.30% APY in return for a five year commitment.

Ally

Current 1-year APY: 2.00%

Ally is an online bank, which means they can offer higher interest rates on investments due to the low overhead fees. Ally allows you to open a CD with a $0 deposit. You can’t add funds once your account is open, though, so be sure to set aside the amount you want to invest before opening the account. If you can leave your money in the CD for at least 60 months, you’ll earn 2.50% APY on your investment. A great feature about Ally Bank is that if the APY rate rises during the lifetime of your CD, they offer a raise your rate option, allowing you to raise your interest rate twice over the course of 4 years.

Discover

Current 1-year APY: 2.00%

Discover is another online banking option, and they make it easy for you to open a new IRA CD or roll over your current IRA investment into a CD. The process will take about ten days, as you will need to sign physical paperwork, but like Ally, Discover offers a high interest rate on a five year IRA CD. Their easy savings calculator makes it simple for you to compare rates with other banks and track your interest growth. Once you’re set up, Discover also has robust banking tools that make it easy to plan for your future and ensure your retirement funds are on track to reach your goals.

Capital One

Current 1-year APY: 2.00%

Capital One is a solid option for customers who are looking for the convenience of online banking with the option of going into a branch if necessary.  Capital One offers a 2.20% APY on a one year IRA CD, which is their highest available APY. They also offer investment terms as short as six months, which will yield a .60% APY. This bank helps its customers by automatically opening up an IRA savings account along with the CD, which allows customers to set aside money that will earn a small amount of interest while they build up the amount in the account before investing it.

Synchrony

Current 1-year APY: 2.00%

Synchrony is an online savings bank that specializes in various types of savings accounts. Checking accounts are not offered through Synchrony, which means that they have low overhead, which results in fewer fees and more savings for their customers. A 12-month IRA CD with Synchrony will earn you 2.25%% APY, and the interest rates go up from there, including a 2.45% APY for a 60-month IRA CD. Synchrony also offers a number of savings and planning tools to help you stay on track for retirement.

TIAA Bank

Current 1-year APY: 2.05%

TIAA Bank allows consumers to open a CD in about five minutes, and they offer three tiers of CDs to choose from: a basic CD, a bump-rate CD and the Yield Pledge CD. All three of these are IRA eligible. The basic CD requires a $1,000 initial deposit and you will be locked into the APY for the duration of the investment. The bump-rate CD allows you to increase the APY one time during the lifetime of the CD. It requires a minimum deposit of $1,500 to open. The Yield Pledge CD requires at least $5,000, and in return, TIAA Bank, “promise(s) that the yield on your account at the time you open, renew, or roll your expiring CD into a new Yield Pledge® CD will be in the Top 5% of Competitive Accounts based on Bankrate Monitor National Index survey data from that week.” This pledge covers funds of up to $1 million.

IRA CDs vs. regular CDs

A regular CD is a savings option that will earn you higher APYs than a traditional savings account, but in return it comes with more restrictions. The typical rule for regular CDs is that the longer you leave the money in the CD, the higher the interest rate earned on the account. If you invest in this type of CD but need the money earlier than the term date, you should expect hefty fines and penalties for withdrawing the funds. If you know that you won’t need the money you plan to invest in the near future, a CD is a great way to earn solid interest at no risk to you.

An IRA CD, on the other hand, involves using the retirement funds from your IRA to invest into a CD. One of the benefits of this is that your money enjoys all the tax shelters of an IRA account while earning you the high interest rates offered on CDs. This type of CD is specifically for retirement investments, and you will be charged fees, penalties and taxes if you withdraw the money prior to the age requirements established by federal law.

IRA CDs vs. high-yield savings accounts

When it comes to IRA CDs vs. high yield savings accounts, IRA CDs are the winner, hands down. IRA CDs receive tax benefits because they are meant for retirement, whereas any other type of account — including high yield savings accounts — would not.

Most savings accounts, even accounts with high APYs, can’t compare to the APYs offered on CDs. Some banks may also allow you to “bump” your APY on your CD, meaning that if the APY offered by your bank goes up after you invest, you have the option to bump your CD to that rate and accrue higher interest.

IRA CDs vs. money market accounts

Money market accounts (MMAs) are interest-bearing accounts that pay a higher interest rate than your average savings accounts, and are often used similarly to a checking account, though they have less flexibility. Money market accounts require a certain amount to open and you have to keep a certain amount in the account for it to remain open, and the interest that they earn is affected by inflation, among other factors. The reason that MMAs offer higher interest rates is because the money you deposit can be invested into CDs or other types of investments, which makes it a riskier prospect in regard to returns.

Some people are willing to risk more and invest in these potentially higher yielding options over IRA CDs, but you must decide if this is something you’re comfortable with. To be clear, MMAs are relatively low-risk investments, but they were part of the 2008 economic crisis and many people weren’t able to recover the funds they lost during that time. MMAs also do not qualify for the tax exemptions that an IRA CD does.

The impact of 0.10% on $1,000

You worked hard for your money, so make sure that your money works hard for you in return. If you made an initial investment of $1,000 on an IRA CD at a rate of 2.49% APY, you would make $24.90 on your investment at the end of a 12-month period. That same account would earn you $76.58 after three years, $130.86 after 5 years and $278.84 after 10 years. Compare that same initial $1,000 deposit to an investment that earns 2.50% APY, just 0.10% more than the 2.49% seen above. The 2.50% APY would earn you $25.00 in 12 months, $76.89 after 3 years and $131.41 in 5 years. After 10 years that $1,000 initial investment would have earned you $280.08.

This may not sound like much, but as your money grows and the interest compounds, it can add up, especially if you have multiple investments that are active at the same time. If you decide to combine them into one account, that 0.10% can make a big difference in your overall earnings, especially when you factor in the amount you’ll save on taxes with this type of account.