Contributor, Benzinga
September 15, 2023

An IRA CD is an individual retirement account (IRA) that holds certificates of deposit (CD). CDs offer stable returns and are low risk, allowing you to grow a retirement account without worrying about losses. Usually, IRA CDs are best for those entering retirement or already in retirement, as growth potential is less than other investment types. The best IRA CD rates range from 3.5% to 5.61% APY. Read on to find the best CD rates for your IRA. 

6 Best IRA CD Rates

Here are six top picks with average interest rates from 4%-5% APY. 

  • Best for High APY Rate CD: Connexus Credit Union 
  • Best for No Minimum Deposit: Synchrony Bank
  • Best for Low Minimum Deposit: Alliant Credit Union
  • Best for 10-Year CDs: Discover Bank
  • Best for Short-Term CDs: Ally
  • Best for Military Service Members: Service Credit Union 

1. Best for High APY Rate CD: Connexus Credit Union 

Connexus Credit Union IRA offers a 5.61% APY on its one-year CD. While the minimum deposit is $5,000 for consumers looking for a secure way. Connexus Credit Union also offers checking and savings accounts with no monthly fees. 

Annual Percentage Rate: 5.61% APY for one-year CDs; 4.51% APY for three-year CDs; 3.91% APY for five-year CDs. 

Pros

  • Higher APY
  • Well-established credit union
  • Good online access and account management
  • No fee checking and savings accounts
  • NCUA insured 

Cons

Higher minimum deposit on CDs

2. Best for No Minimum Deposit: Synchrony Bank

Synchrony Bank is an online savings account and CDs with no monthly fees. While it doesn’t offer a checking account, there is a money market option.

Annual Percentage Rate: 5.10% APY for one-year CDs; 4.35% APY for two-year CDs; 4.00% APY on four and five-year CDs.

Pros

  • Competitive rate on CDs 
  • No minimum deposit
  • No monthly fees
  • FDIC insured
  • Competitive savings account APYs
  • ATM fee rebates

Cons

  • No cash deposit
  • No checking account available
  • No branch access

3. Best for Low Minimum Deposit: Alliant Credit Union

Alliant Credit Union offers broad membership criteria that allow access to its excellent rates to more people. The strong rates and a good online and mobile banking experience make it a solid all-around choice. Minimum deposit of $1,000. 

Annual Percentage Rate: 5.15% for one-year CDs; 4.45% for three-year CDs; 4.35% for five-year CDs

Pros

  • High one-year APY 
  • NCUA insured  
  • Well-established credit union
  • More open membership requirements

Cons

  • $1,000 minimum deposit

4. Best for 10-Year CDs: Discover Bank

Discover Bank is well-established with competitive rates with a broad range of term lengths, up to 10 years. Although the minimum required deposit of $2,500 is higher than other banks, it's FDIC-insured with flexible term options. 

Annual Percentage Rate: 4.85% for one-year CDs; 4.30% for three-year CDs; 4.00% for five-year CDs

Pros

  • Competitive APYs on CDs
  • No overdraft fees
  • Competitive rate on savings accounts 
  • FDIC insured

Cons

  • $2,500 minimum deposit

5. Best for Short-Term CDs: Ally

Ally has three different types of CDs, including the high-yield CD. There’s no minimum deposit requirement for any of these certificates of deposit. You can compare Ally CDs to our list of the best CD rates. Ally has CDs with terms from three months to five years.

Annual Percentage Rate: 4.85% for one-year CDs; 4.25% for three-year CDs; 4.10% for five-year CDs

Pros

  • No minimum deposit
  • 11-month CD with no early withdrawal penalty 
  • Flexible terms 
  • FDIC insured

Cons

  • No CDs over 5 years long

6. Best for Military Service Members: Service Credit Union IRA Certificate

With a low minimum deposit, the Service Credit Union IRA Certificate offers competitive rates and security. The military-focused credit union offers membership to anyone who joins the American Consumer Council. With a low minimum opening requirement and competitive rates, it's a solid choice, with a 5.25% APY on 18-month deposits of $25,000 or more. 

Annual Percentage Rate: 4.50% for one-year CDs; 3.35% for three-year CDs; 3.50% for five-year CDs

Pros

  • Competitive rates
  • Low minimum balance 
  • NCUA insured

Cons

  • Only for military service members
  • $500 minimum deposit

What is an IRA CD?

An Individual Retirement Account (IRA) is a tax-advantaged retirement account. You can choose between a traditional IRA, a Roth IRA or a SEP IRA. Each has different tax advantages and income requirements.

An IRA CD means investing IRA funds in a CD. The main difference is that interest earned on a regular CD is taxable, while interest earned from a CD in an IRA grows tax-free. You can continue to re-invest the funds and grow your retirement wealth over time without paying taxes on the earnings. 

It's important to note that with a Roth IRA, you won't need to pay taxes on earnings if you wait to withdraw them until at least age 59½. For a traditional IRA or SEP IRA, your CD earnings will grow tax-free, but you'll pay applicable income tax on withdrawal. 

Benefits of Investing in an IRA CD

The benefits of investing in an IRA CD include tax advantages and the potential for higher interest rates. CDs are a low-risk investment option for retirement savings that are federally insured, which means your money is secure. There are options to invest in CDs regardless of whether you have a traditional or Roth IRA. Key benefits include:

  • Tax-free or tax-deferred growth
  • Low-risk investment
  • Higher returns than savings accounts
  • Flexible terms from three months to 10 years

Factors to Consider When Choosing an IRA CD

Consider the following factors when choosing an IRA:

Interest rates and Annual Percentage Yield (APY)

A higher interest rate and APY can yield significantly higher savings over time. An APY of 3% might barely outpace inflation. Look for an APY of 4% to 5% on CDs. With most of the options above, one-year CDs offer the most competitive APYs. After the one-year term, you can re-invest those funds to continue to earn. 

Terms and Maturity Dates of the CD

The term or maturity dates of the CD refer to how long you're required to keep the funds in the CD. Early withdrawals can lead to significant penalties or fines. When choosing an IRA CD, consider whether you will need the funds and choose a maturity date short enough to avoid the possibility of early withdrawal fees.  

Minimum Deposit Requirements and Fees

As it's clear from the list above, minimum deposits range from no minimum to $5,000 or more. Some CD accounts only offer the most favorable terms or high APYs on high deposits. This is an important consideration for IRA CDs because, without the minimum deposit, that particular account is either inaccessible or only available for a lower APY.

Accessibility and Penalties for Early Withdrawal

Some CDs allow early withdrawals penalty-free, although they are uncommon. Generally, if you withdraw funds early, you'll need to pay a penalty. You should plan for when you need the funds. For example, don't put funds in a 10-year CD if you suspect you might need them in two to three years.

IRA CDs for Retirement Planning and Beyond

An advantage of a Roth IRA is the ability to pass it on to heirs tax-free. If you're looking for tax-deductible savings or tax-advantaged estate planning, your IRA CDs could be used to pass on generational wealth. While there may be other better-return investment options, CDs are good solutions when you seek risk-free investment options with modest returns. Find the best CD rates for 2023 or the best 1-year CD rates to get started. 

Frequently Asked Questions 

Q

Who is paying the highest interest rate on CDs?

A

Of the options discussed above for IRA CDs, Connexus Credit Union pays the highest interest rates. Other high APY options include LendingClub CD, Alliant Credit Union and Sallie Mae Bank.

Q

Can you get 5% on a CD?

A

If you’re wondering whether you can get 5% APY on a CD, the answer is yes! See the options above and understand the minimum deposit amounts for a 5% or higher APY.

Q

Are IRA CDs a good investment?

A

IRA CDs are a low-risk, modest-return investment. However, for those who still have decades to retirement, other options may allow retirement wealth to grow faster.

About Alison Plaut

Alison Plaut is a personal finance and investing writer with a sustainable MBA, passionate about helping people learn more about sustainable investing and long-term wealth building for financial freedom. She has more than 17 years of writing experience, focused on investments, business, personal finance, and real estate. Her work has been published in The Motley Fool, MoneyLion, and regularly appears on Benzinga.