As you continue to plan for retirement – or maybe you are even already retired -- it is natural to think of ways to protect and supplement your retirement savings while protecting it from market volatility. No matter whether you have a lot in savings, or a little, it’s never too late to keep working toward your retirement goals. And there are many ways to add to your savings -- for example, a Certificate of Deposit IRA could help you save a little bit extra without taking on additional risk.
Reducing your overall portfolio risk is important in volatile times like these, especially as you get closer to retirement age. Keep reading to learn more about CD IRAs and how they work, and how Academy Bank’s CD IRA could be the right choice for you.
Investment Options for Retirement Savings
Saving for retirement is one of the most important savings goals that many people have. Depending on your place of employment, you may already be enrolled in a company 401(k) retirement savings plan. However, that’s not the only type of retirement account you can contribute to.
Individual Retirement Accounts, or IRAs, are another type of retirement account you can use alongside -- or independently of -- your 401(k). IRAs can be invested in several different types of assets, such as stocks, bonds, mutual funds, and certificates of deposit (CDs)
Of course, each of these types of assets can yield very different results and holds a unique risk profile. Investing in stocks, for example, is a riskier type of asset. As stock values can fluctuate wildly along with the market, stocks are often a better investment decision for those with many years until retirement. This allows the market to even out over a long period of time.
CDs, on the other hand, are essentially risk-free, assuming you’re able to leave your money in the account until the maturity date. This ensures you don’t need to pay an early withdrawal penalty.
How a Certificate of Deposit (CD) IRA Works
When looking at investing in an IRA, there are two main types: traditional IRAs and Roth IRAs. The main difference is when your account is subject to taxes.
Traditional IRAs are taxed when you withdraw the money from the account, so contributions are made with pre-tax dollars. This account offers tax-deferred growth. Roth IRAs, on the other hand, are funded with post-tax dollars, so they are not taxed upon withdrawal. In this case, you could say your investment is growing tax-free.
When choosing between a traditional or Roth IRA, think about your current tax bracket and compare it with where you expect to be at the time of withdrawal. This may help you make your decision.
A Certificate of Deposit IRA account
can be opened as either a traditional or Roth IRA. A CD IRA essentially means that your IRA invests in CDs. CDs can be useful as investment vehicles for those who are looking to earn interest on their money without taking on risk. This means your CD IRA can be a “peace of mind” account.
Other benefits of CDs include the potential for a higher interest rate than with other types of savings accounts, guaranteed return plus interest, and being insured by the FDIC. In 2022, an IRA CD has a contribution limit of $6,000, or $7,000 if you’re age 50 or older. In 2023, this IRA contribution limit will increase
to $6,500 and $7,500, respectively.
Academy Bank Offers Competitive CD IRAs*
At Academy Bank, we know how important it is to plan for the future. An IRA is a simple and easy way to enjoy guaranteed returns, and the peace of mind that comes with them.
Our IRAs have the following benefits:
- Guaranteed tax-deferred growth
- Balances are FDIC insured up to the maximum allowed by law
- Flexible terms to fit your specific objectives
- Yields that are higher than many Treasury bonds, with no risk to your principal
- Traditional and Roth IRA options are available
You’ll need a minimum opening balance of $500 in order to obtain the disclosed annual percentage yield. A fixed rate of interest is earned on the entire balance.
Build Your Savings and Your Peace of Mind With Academy Bank
A CD IRA from Academy Bank offers a way to supplement your retirement savings plan with a risk-free investment option.