Updated: October 1, 2018

Compare IRA CD rates. See all CD rates from banks and credit unions to find the best deal.

Investing in an IRA CD is relatively easy. Buying an IRA CD is no different from purchasing a regular CD, but instead of transferring money into a CD from your checking or savings account, you would buy a CD using funds in your IRA.

IRA CDs are also appealing to investors who like predictability. Use this CD calculator to see exactly how much money you’ll earn over the term of the IRA CD.

What is an IRA CD?

An IRA CD is an individual retirement arrangement (IRA) – also referred to as an individual retirement account – in a CD. Some people will open a traditional IRA CD until the IRA contribution deadline for that tax year in order to deduct some or all of their contributions to a traditional IRA. For instance, earlier this year the 2017 IRA contribution deadline was April 17. A Roth IRA CD isn’t eligible for this deduction.

Check with your tax adviser to make sure you’re able to contribute to an IRA. Others may roll over a 401(k) to a traditional IRA.

Who are IRA CDs best for?

IRA CDs are best for diversifying a portfolio. They can diversify your portfolio if your other retirement accounts are invested in areas such as the stock market, mutual funds, exchange-traded funds or other investment vehicles where a loss of principal is possible.

That’s why IRA CDs are also a good option for someone with a low-risk tolerance. If a person doesn’t like surprises – and wants to know exactly how much interest the investment will make – a fixed-rate IRA CD provides that. As long as the IRA CD is kept until maturity, the IRA CD will earn the expected interest and won’t be penalized.

Retirement funds can be placed in a CD at an FDIC institution. FDIC insurance is up to $250,000 for the combined balance of all self-directed retirement accounts owned by the same person in the same insured bank, according to FDIC.gov. For a self-directed retirement account, adding beneficiaries doesn’t increase your maximum FDIC insurance coverage.

Is an IRA CD tax-deductible?

You may be able to deduct some or all of your contributions to a traditional IRA. However, Roth IRA contributions aren’t deductible. You also don’t report the Roth IRA contributions on your tax return, according to IRS.gov.

Can I transfer an IRA CD to another bank?

A trustee-to-trustee transfer is a possible method to move your IRA CD from one bank to another. It’s best to make sure that your CD has matured before moving it so that you avoid potential early withdrawal penalties on your CD.

You may want to transfer the IRA CD to an IRA savings account or IRA money market account before initiating a trustee-to-trustee transfer to another IRA CD. Check with your bank to make sure the funds don’t have to be in this IRA savings account or money market account for a certain period.

What is the penalty for early withdrawal of an IRA CD?

One penalty for early withdrawal on an IRA CD would be the same as any other CD – if you withdraw your money before the CD matures, you may have to pay an early withdrawal penalty.

If you withdraw before age 59 1/2 from a traditional IRA CD, you may be subject to pay an additional 10 percent tax on early distributions.

How to effectively use an IRA CD and avoid penalties

To effectively use an IRA CD, you should fund it with money you probably won’t need until after age 59 1/2. This will help you avoid an IRS additional tax.

“It could be a way to diversify a much larger IRA,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “An IRA that’s otherwise very heavily invested in risk assets, such as the stock market, can be diversified by parking a sum of money in a CD where you have Federal Deposit Insurance protection, guaranteed return within the context of a tax-advantaged investment.”

Best IRA CD Rates of October 2018

Here are Bankrate’s picks for the best IRA CD rates. Be sure to consider interest rate and minimum deposit when choosing the best IRA for your goals.

TIAA Bank

APY: 1.65%-3.10% APY (3 months-5 years)

Minimum deposit: $5,000

TIAA Bank is a division of TIAA, FSB and is a part of TIAA’s Retail Financial Services business. In June, TIAA announced the launch of TIAA Bank – which brought EverBank and TIAA Direct under a new name and brand. TIAA Bank is headquartered in Jacksonville, Florida. TIAA, FSB is a wholly owned affiliate of TIAA. The Yield Pledge CD promises that the yield on your CD when you open, renew or roll over your expiring CD will be in the top 5 percent of competitive accounts, according to the Bankrate’s survey data for that week.

PurePoint Financial

APY: 2.60%-3.00% APY (1 year-3 years)

Minimum deposit: $10,000

PurePoint Financial is a hybrid digital bank and a division of MUFG Union Bank, N.A. PurePoint Financial is a member of the Mitsubishi UFJ Financial Group Inc, which according to PurePoint’s website is the fifth largest bank in the world, based on total assets. PurePoint Financial made its debut in 2017.

Marcus by Goldman Sachs

APY: 0.60%-3.15% APY (6 months-6 years)

Minimum deposit: $500

Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA. All deposit products are provided by Goldman Sachs Bank USA, Salt Lake City Branch. One of the perks of opening a Marcus CD is that if it reaches the $500 minimum deposit within 10 days of the day you open the CD – opening day plus 10 days – you’ll get the highest published APY offered on the Marcus CD for the product and term that you opened.

Capital One

APY: 2.50%-3.00% APY (1 year-3 years)

Minimum deposit: $0

Capital One’s 360 IRA CDs have some of the most competitive APYs. Interest on these CDs is accrued daily and compounded monthly. 360 IRA CDs can be opened online and accounts can also be opened at the more than 30 Capital One Cafe locations across the U.S. Capital One 360 ranked highest in the J.D. Power 2018 U.S. Direct Banking Satisfaction Study.

SallieMae

APY: 1.30%-2.90% APY (6 months-5 years)

Minimum deposit: $2,500

Sallie Mae Bank is the retail arm of Sallie Mae and has competitive CD APYs. In 2004, Sallie Mae became a fully privatized company – after starting as a government-sponsored enterprise. Sallie Mae Bank opened in 2005. In 2014, Sallie Mae split into two separate companies – SLM Corp. and Navient Corp. The former includes Sallie Mae Bank, while the latter services government loans. Sallie Mae Bank is a subsidiary of SLM Corp.

Discover Bank

APY: 0.35%-3.10% APY (3 months-10 years)

Minimum deposit: $2,500

Discover Bank says on its website that you should choose it because of it keeps it simple, has no gimmicks and because most features have no fee. Interest on Discover Bank CDs are compounded daily and credited to your CD monthly. Discover Bank gives a nine-day grace period once your CD matures.

Ally Bank

APY: 0.75%-3.00% APY (3 months-5 years)

Minimum deposit: $25,000

Ally Bank offers more CD options than most direct banks. Ally Bank gives savers options with a High Yield CD and a Raise Your Rate CD. If you fund your IRA CD within 90 days at Ally Bank, you’ll get its best rate for the term and balance on either the day you open or the day you fund the account. The interest on an Ally Bank CD is compounded daily. Ally Bank IRA CDs are available as a traditional, Roth and SEP IRA.

Learn more about IRA CDs:

Pros and cons of IRA CDs

Taking an RMD from IRA CD

Roth IRA CD withdrawal penalties