If you are looking for some guidelines on finding the best IRA CD rates in the market, this article will help you out.
When you think about investment options these days, one thing that you realize is that there are plenty to choose from. Investments range from high-risk options to very low-risk (safe) ones. One of the safest is an investment in IRA certificates of deposit, as part of your retirement planning.
What is an IRA CD?
An individual retirement account (IRA) is a special kind of savings account, that has tax benefits and certain special restrictions. The money you invest in an IRA is not taxed until you withdraw it after retirement. There are many types of this account. The money saved in any type of IRA can be invested in bonds, stocks, mutual funds, and even CDs.
A certificate of deposit is a special kind of financial instrument, that is classified as a ‘Time Deposit’. It is a sum of money that you deposit in a bank, for a certain period of time; on the termination of which, you receive the principal sum back, along with promised interest.
This period of time varies from six months to even five years. CDs are some of the safest investments, as they are insured by the government (the Federal Deposits Insurance Corporation, to be precise), but they come with low interest rates. Banks offer either a fixed or a variable interest rate.
An IRA certificate of deposit is created from money invested in that account. One special feature about this investment is that it has a higher interest rate, than other type of CDs.
It certainly offers you more profit than a regular saving accounts or even money market investments. It is a safe and comparatively high-yield investment option, for anybody who is investing for retirement.
As I said before, what makes an IRA CD, one of the safest investments, is the fact that they are insured (up to USD 250,000), by the FDIC. In case you create an IRA CD at a credit union, then it is insured by another institution called the ‘National Credit Union Administration’.
As you must have figured out by now, they are some of the most ultraconservative and safest investments one could make. The trick is to find the best rates that you can get and invest for as long a time period as possible. That will guarantee the maximum possible profit, with such a low-risk investment.
Finding the Best Rates
If you do not have an IRA, then you need to open one first. Choose one which suits your requirements. The popular options are a traditional or Roth IRA. Once you are clear about the type, that will be conducive to your retirement planning, you can start scouting for the best rates available in the financial market. You could either consult a financial adviser or search for the best rates on your own.
Start by researching online and checking out the websites of major banks. Make a list of the rates offered by each, along with the period of deposit.
Calculate the cumulative profit that you will gain from each. You could also divide your money into multiple CDs, with different periods of maturity. This can help you create a ladder of sorts, with different CDs, that mature in periodic succession.
A smart move is to open an IRA, with the same bank where you create the CD. That way, after maturity, the money remains in the same amount and there is no risk of getting penalized through transfer of funds outside the account.
The best rates do offer you sizable gain but keep in mind that they take up a lot of time to mature. Unless you are looking at it as an investment for retirement, you can profit faster, investing in shares and mutual funds instead.