Get high interest and tax benefits with an IRA CD

The end of the year is an ideal time to reflect on your savings progress for retirement.  At any point in your retirement-planning journey, adding an Individual Retirement Account (IRA) Certificate of Deposit (CD) can be an excellent way to boost your savings.   

With interest rates on the rise, opening an IRA CD is a powerful tool for building your nest egg. It offers the security of a traditional CD with the tax advantages of an Individual Retirement Account. Investing in an IRA CD allows you to lock in a fixed interest rate for a set period, typically ranging from months to several years, ensuring a steady growth of your savings. 

First Fed’s 12-month IRA CD now offers a 3.95% APY (annual percentage yield) with just a $500 minimum deposit, available in both traditional and Roth IRAs. For full details click here.  

“It’s really convenient to open up a retirement account with First Fed,” said Christy Nutter, Strategic Initiatives Manager at First Fed. “You can make an appointment with one of our relationship bankers in any of our branches to set up your IRA and then manage all of your financial accounts in one place.” 

If you are new to IRAs, it is helpful to understand the basic differences between the three types: the traditional IRA, Roth IRA, and rollover IRA. Your tax advisor may be helpful in determining the best choice for your financial landscape.  

In general terms, the traditional IRA allows you to contribute pre-tax dollars, reducing your current taxable income. However, you will pay those deferred taxes when you withdraw during retirement. This option may be best if you think your tax rate will be lower when you retire, or you need the tax benefits of reducing your income now. There are also “liquid” versions of a traditional IRA that allow for more flexible withdrawals. 

A Roth IRA works in reverse. You pay taxes on your contributions this year, but the magic happens when you reach retirement: your withdrawals are entirely tax-free. It's like planting a money tree that blossoms in your retirement years. Additionally, Roth IRAs offer flexibility, allowing for penalty-free withdrawals of contributions (not earnings) before retirement, under certain conditions. 

The third type is a rollover IRA, a specialized type of IRA designed to hold funds "rolled over" from an existing IRA at another institution or a previous employer-sponsored retirement plan, such as a 401(k). It allows individuals to transfer funds from an old employer's retirement plan to a new IRA without incurring taxes or penalties. 

To open an IRA or an IRA CD, visit the locations page on the First Fed website to find your local branch. Calling ahead to schedule an appointment will save you time when you visit your preferred branch and assure that a team member is available to discuss your options with you.  

“By visiting a branch, we can help you set up automatic payments from your bank account to your IRA savings account to deposit throughout the year, or you can also deposit funds into an IRA Certificate of Deposit to help it grow even more,” explained Nutter. “You can view and monitor the progress of your IRA and IRA CD right in online banking.”   

The 2023 IRA contribution limit is $6,500 for people under 50. Those over 50 who qualify can contribute an additional $1000 catch-up contribution. The 2023 tax contribution deadline is April 15, 2024. The IRA CD can be set up to include both 2023 contributions as well as past contributions within an existing IRA account. 

“It’s always a good time to think about your future,” said Nutter. “Our branch teams are happy to help you open your IRA CD account before the April 15 deadline.”