investing

How to find best IRA CD rates

Don Taylorq_v2.gifDear Dr. Don,
I have a $30,000 IRA CD coming due with Bank of America and am looking for the best CD rates. Can you steer me to a good rate?
-- Dolores Depositor

a_v2.gifDear Dolores,
You can shop nationwide for IRA CDs using Bankrate's "Compare CD Rates" feature. I did so when writing this reply, and the top one-year IRA CD rate in my search was a 2 APY.

If you're willing to extend the maturity, you can find an 18-month CD with an APY of 2.15 percent, or a two-year CD with a 2.25 APY. Extend out to a five-year maturity and you can earn 3.35 APY. That's the longest maturity that Bankrate tracks using the "Compare CD Rates" feature.

You always have to choose between locking in a longer rate or staying short so you can reinvest, ideally at higher rates, in the future. One way to get past this dilemma is to build a CD ladder where you invest in multiple maturities and reinvest in the longest maturity when a CD matures.

The Bankrate feature, "Laddering: How to build a CD ladder," explains this approach in greater depth.

You also should consider when you'll have to start taking required minimum distributions, or RMDs, out of the account or when you may need the money. The Bankrate feature, "Know your required minimum distribution," will help you understand RMDs, which were suspended for the 2009 tax year. Talk to your tax professional if you're uncertain about how RMDs apply to your retirement accounts.

Bankrate's content, including the guidance of its advice-and-expert columns and this Web site, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this Web site is governed by Bankrate's Terms of Use.

Read more Dr. Don columns for additional personal finance advice.

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