- Since an IRA is tax-deferred, with an IRA CD, you won't pay taxes on your contributions, capital gains, interest and dividends until you withdraw. With a non-IRA CD, you pay yearly taxes on any gains.
- A CD is a fixed-term savings account. An IRA CD's terms will typically vary between 6 months and 5 years; the longer the term, the higher the fixed interest rate.
- IRA CDs require a minimum deposit that must remain in the CD during the duration of the term, with penalties for early withdrawal. If you need your money liquid, an IRA CD may not be right for you.
- Since IRA CDs are fixed-rate, you are locked into your interest rate. If you expect interest rates may go up, opening a CD may not be the way to go.
- IRA CDs are often FDIC insured up to $250,000.
- IRA CDs are often recommended for younger folks or as a temporary measure, since they are more restrictive than other methods of investing and may not return as much over a longer duration. If you are planning on opening a CD anyway, an IRA CD may be a better choice.
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