How an IRA CD Can Help Save You Money for Retirement

The most important benefit of an individual retirement account is that certain types can grow tax-deferred. This means that you can continue to make deposits into them without paying taxes. You'll pay taxes on the amount when you begin to withdraw it once you've reached retirement age. In addition to giving you a way to grow your savings, an IRA CD also lets you write off any deposits you make into your IRA (up to $5,000 as of 2011, although you can make an extra contribution of $1,000 each year if you're age 50 or above).
Once your IRA CD reaches its maturity date (generally every 5 years), you can choose to roll it over. You have a certain timeframe in which to decide this. If you roll over your IRA CD but then later cancel it, you will pay a penalty which can eat up all the savings you've earned through interest on your CD. By rolling over your IRA CD, you'll be able to lock in the current fixed interest rate for the same time period as when your CD was originally established. Because it's a specific type of individual retirement account you'll be able to get a predictable rate of return since your earnings will not yet be taxed
Another consideration to keep in mind is that IRA CDs are a safe and secure way to grow your investments while maintaining a low risk investment profile. In some cases, you can even calculate how much you'll earn at the end of the maturity date. Discover Bank has an IRA CD calculator that can help. Beyond CDs, there are many other banking products that you can invest your individual retirement account funds into - however these carry certain levels of risk versus reward. If you consider yourself a conservative saver, an IRA CD is one of the best financial savings vehicles you can use to help you save for retirement.