These 8 banks offer the best IRA CD rates for your retirement savings

IRA CDs can be an attractive option if you want to maximize your retirement savings. IRA CDs offer the stability of traditional CDs, with the added benefit of tax-deferred or tax-free growth for your savings. 

We look at some of the best banks and credit unions offering IRA CDs, comparing their rates, terms, and minimum deposit requirements.

Best IRA CDs

Here are the best IRA CD rates as of September 2024.

What is an IRA CD? 

An IRA CD is a type of CD that’s held within an Individual Retirement Account. Money invested in an IRA CD is subject to the same tax advantages and withdrawal restrictions as other IRA investments. 

There are two main types of IRA CDs: Traditional IRA CDs and Roth IRA CDs. With a traditional IRA CD, contributions are pre-tax, and earnings grow tax-deferred until withdrawal. With a Roth IRA CD, contributions are made with after-tax dollars, but earnings grow tax-free, and qualified withdrawals are also tax-free. You can use a tax calculator to determine how much you can earn on either account.

 IRA CDs typically have terms that range from three months to over 10 years. Like regular CDs, IRA CDs pay a fixed rate over the entire term.

IRA CDs vs. regular CDs

One of the main differences between an IRA CD and a regular CD is how they’re taxed. With a regular CD, earnings are subject to federal income tax each year and may also be subject to state income tax. With an IRA CD, earnings are either tax-deferred or tax-free, depending on the type of IRA.

IRA CD early withdrawal penalty

Another difference is the withdrawal restrictions. With a regular CD, you can often withdraw your money at any time, though you may face a penalty if the withdrawal is before maturity. 

With an IRA CD, early withdrawals may be subject to an early withdrawal penalty and a 10% early withdrawal penalty from the IRS if you're under age 59 1/2. There are a few exceptions to this rule, like if you use the money for certain expenses or due to a disability. 

Even if you avoid the IRS penalty, you may still face an early withdrawal penalty from the bank. These penalties can vary but are typically a percentage of the interest earned on the CD. For example, a bank may charge a penalty of 90 days' worth of interest for an early withdrawal from a 1-year IRA CD. 

Benefits of using an IRA CD

Investing in an IRA CD can offer several key benefits for retirement savers. 

• Tax-deferred growth: By delaying when you pay taxes on CD earnings, you can allow those earnings to grow tax-free until retirement. 
• Higher interest rates: In exchange for losing liquidity, you can earn a higher interest rate when you stash your money in a CD versus a savings account. “In our current interest rate environment, investors can get some of the highest yields on CDs since the global financial crisis,” says Jonathan Ford Jr., president at JFJ Advisory Services. This can help your retirement savings grow faster over time.
• Fixed returns: “IRA CDs are attractive because of the stability that they can offer,” says Ford, “When you put money into a CD, you know what your rate of return will be.” This can make it easier to plan for your retirement and ensure that you have a stable source of income when you need it. 
• Security: Most CDs are FDIC-insured (or NCUA-insured for credit unions), up to $250,000 per person per account. This provides a low-risk option for your retirement savings. 
• Diversification: IRA CDs can help diversify your retirement portfolio, reducing overall risk.

How to pick the best IRA CD

When shopping for the best IRA CD, there are several factors to consider beyond the interest rate.

• Term length: IRA CDs can range from a few months to several years. Generally, long-term CDs offer higher rates but require you to lock up your money for longer. 
• Minimum deposit: Some banks require an initial deposit to open a CD, ranging from a few hundred to several thousand dollars. 
• Early withdrawal penalties: Early withdrawals from an IRA CD can trigger penalties from both the bank and the IRS. Be sure to understand these penalties before investing. 
• Bank reputation: Choosing a reputable bank or credit union with a strong track record of financial stability is important.

IRA CD interest rate forecast 

CD rates are still high right now, with rates above 4% or even 5% APY. This is due to recent actions by the Federal Reserve to combat inflation. 

“The Fed has been hiking rates aggressively for almost two years now,” Ford says. “This has created an investment landscape where certain financial instruments such as CDs can look very attractive to investors.” 

Many experts predict that interest rates will begin to fall again in the coming year as the economy stabilizes. This means that the current high rates offered by many banks and credit unions may not last forever. 

In the current rate environment, short-term IRA CD rates are often higher than long-term IRA CD rates. For example, a 1-year IRA CD may offer a higher interest rate than a 5-year IRA CD. This reflects the expectation that interest rates will fall in the future. 

“The Fed has signaled they believe they are done raising rates,” Ford says. “If they’re correct, that would mean that CD rates are as high now as they will probably get. When the rate cuts start, which may be as soon as this summer, you should expect CD rates to fall accordingly.” 

For retirement savers, this presents an opportunity to lock in high rates on short-term IRA CDs while maintaining flexibility to adjust your strategy as rates change. 

However, it’s important to consider your financial goals and risk tolerance before making any investment decisions. 

How to maximize your IRA CD returns

If you're looking to get the most out of your IRA CD, there are several ways you can use it to maximize your returns. 

1. Shop around for the best rates: Don't just settle for the first IRA CD you find. Compare rates from multiple banks and credit unions to ensure you get the best return. “Make sure to check out many different offerings to see which institutions offer the best rates,” Ford says. “Online banks can offer very good CD rates worth checking out.” 
2. Consider laddering your CDs: CD laddering involves investing in multiple CDs with different maturity dates. This allows you to take advantage of higher rates on long-term CDs while still maintaining some liquidity in case you need access to your funds. 
3. Keep an eye on early withdrawal penalties: While holding your IRA CD until maturity is generally best, unexpected expenses can arise. Understand the early withdrawal penalties and factor that into your decision-making process. 
4. Consider a bump-up CD: Some banks and credit unions offer bump-up IRA CDs, which allow you to take advantage of rising interest rates. With a bump-up CD, you can "bump up" your rate to a higher level if rates go up during your CD term. 
5. Reinvest your earnings: When your IRA CD matures, don't just cash out your earnings. Instead, consider reinvesting them in a new IRA CD to continue growing your savings. 

How we rated the best IRA CDs 

To determine the best CDs, we carefully evaluated a wide range of factors, including interest rates, fees, and minimum deposit requirements.

Our team analyzed numerous CD offers and selected the top contenders based on these key criteria. The options on this list represent the best value benefits available.

Here are some of the key factors we considered: 

• Interest rate: The interest rate is the primary reason someone would choose a savings, CD, or money market account over another, so this is our most heavily weighted factor. 
• Fees: Fees, particularly early withdrawal penalties can eat into the overall cost of a CD.
• Minimum deposit & balance requirements: High minimum deposits can be a barrier, and high balance requirements to avoid fees or earn the best rate limit the CD's usefulness.

Bottom line 

An IRA CD can be a smart choice to maximize your retirement savings — and these choices above have some of the best rates on the market. 

It’s worth noting that credit unions like America First and Alliant may have more restrictive membership requirements than online banks like Synchrony and Discover. Traditional banks like Wells Fargo may offer lower IRA CD rates but have the advantage of physical branches and a wider range of bank products. 

The best IRA CD for you will depend on your individual financial goals and circumstances. By shopping around for the best rates and considering term length, minimum deposit requirements, and early withdrawal penalties, you can find an IRA CD that meets your needs.

Editorial disclosure: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.