Best IRA Rates

LAST REVIEWED May 01 2020 9 MIN READ

By The Human Interest Team

CDs are certificates of deposit, a type of federally insured savings account. CDs typically have higher interest rates than your standard savings account, and they are safer, lower-risk investments than stocks, funds, and other popular investment types. They can become even better investments when they’re invested in through IRAs. In this article, we’ll discuss how you can merge the benefits of a CD with an IRA and how to find the right IRAs and best IRA rates for your investment style.

How (And Why) To Open an IRA

Individual Retirement Accounts (IRAs) are tax-advantaged investment accounts. These accounts have maximum contribution limits and tax rules from the Internal Revenue Service (IRS). Investors can choose between two basic types: Traditional IRAs, with pre-tax contributions that can be deducted from contributors’ taxable incomes, and Roth IRAs, with post-tax contributions that grow and can be withdrawn tax-free.

IRAs are simple to open and give individuals an easy way to prepare for retirement. They give savers an opportunity beyond employer-sponsored retirement benefits, like a 401(k), to invest in tax-advantaged accounts. The tax benefits of either paying taxes now or later allow investors to invest more in the present and plan for their expected income in retirement. If investors invest $6,000 a year (the maximum contribution limit in 2020) — or $500 a month — over 25 years, an average market return of 8% a year will grow that account so investors can comfortably retire with over $475,000 in their IRA alone.

How to Choose an IRA Investment Account

When you open an IRA, it’s important to decide if you’re going to be an active, hands-on investor or a more passive, hands-off investor. Active investors want to handle their own funds and manage their account independently. Ideal accounts for hands-on investors will have low trading fees to facilitate more flexible trading. Some IRA accounts for hands-on investors include:

  1. TD Ameritrade IRAs offer between $100 and $600 in cash credit. The account has a $0 minimum and costs $0 per trade.

  2. E*Trade IRAs offer between $100 to $2,500 cash credit. The account has a $0 minimum and costs $0 per trade.

Hands-off investors tend to want robo-advisors or trained professionals to manage their accounts. These accounts offer robo-advisors and management assistance:

  1. Betterment IRA has a 0.25% management fee and an account minimum of $0.

  2. Ellevest has a  0.25% management fee and an account minimum of $0.

  3. SoFi Automated Investing has a 0.25% management fee and an account minimum of $0.

Here are some IRAs that offer low fees, promotions and discounts, and/or simple account requirements.

Accounts with Low Fees

Broker

Works with This Investor Type

Commissions

Promotion

Account Minimum

Merrill Edge IRA

Hands-On

$0 per trade

Up to $600

$0

TD Ameritrade

Hands-On

$0 per trade

Between $100 and $600

$0

E*Trade IRA

Hands-On

$0 per trade

$100 to $2,500

$0

Firstrade

Hands-On

$0 per trade

Up to $200 in rebates

$0

Ally Invest IRA

Hands-On

$0 per trade

Up to $3,500

$0

Charles Schwab IRA

Hands-On

$0 per trade

None

$0

Fidelity IRA

Hands-On

$0 per trade

500 free trades

$0

Accounts with Hands-Off Investment Options

Broker

Works with This Investor Type

Commissions

Promotion

Account Minimum

Betterment IRA

Hands-Off

0.25% management fee

Up to one year of free management

$0

Ellevest

Hands-Off

0.25% management fee

Up to $750

$0

SoFi Automated Investing

Hands-Off

$0 management fee

Free career counseling and loan discounts

$0

Schwab Intelligent Portfolios

Hands-Off

$0 management fee

None

$5,000

Schwab Intelligent Portfolios Premium

Hands-Off

$30 monthly

None

$25,000

IRA CD

An IRA CD, or an IRA Certificate of Deposit, is a type of investment individuals can choose. Investors can open IRA plans through brokerages that hold different CDs and similar interest-bearing accounts, and they can invest in a mix of CDs, stocks, and funds. IRA CDs earn interest, and they have a fixed Annual Percentage Yield (APY) that includes compound interest calculations. Investors can use the APY and other details of individual CDs to find the best fit for their personal investment goals. 

Who Should Consider IRA CDs?

CDs are an excellent choice for investors who want to diversify their investments with low-risk options. CDs offer guaranteed returns as long as investors hold the CD for its entire term. They can also be a wise choice for people who want to put all of their IRA funds into CDs instead of having them spread across stocks, bonds, money markets, and CDs.

The main difference between a regular CD and an IRA CD is that the latter comes with tax advantages similar to that of a traditional or Roth IRA. IRA CDs are also subject to the same limitations on contributions and withdrawals as traditional or Roth IRAs.

Pros and Cons of Investing In an IRA CD

Some of the benefits of investing in CDs through an IRA include:

  • Stable investment returns.

  • Insured money if the account is through an FDIC- or NCUA-insured organization.

  • No fees aside from penalties.

  • Simplicity.

However, the rates attached to CDs might not beat inflation or offer the aggressive investment opportunities you might be seeking.

Can I Transfer an IRA CD to Another Bank?

Investors can transfer their CDs through trustee-to-trustee transfers or transferring the amount to more liquid options like IRA savings accounts and money market accounts.

IRA CD Penalty

Because IRA CDs are through an IRA, investors can incur a 10% penalty for withdrawing money before they reach 59 1/2 years old.

Some Common IRA CD Rates

Take a look at how most of these IRA CD rates increase as you go with a longer term length:

Bank

1-Year APY

3-Year APY

5-Year APY

Minimum Deposit

Discover Bank

2.00%

2.05%

2.10%

$2,500

Connexus Credit Union

2.01%

2.31%

2.41%

$5,000

Capital One

1.90%

1.65%

1.50%

$0

Synchrony Bank

2.00%

2.10%

2.15%

$2,000

Ally Bank

2.00%

1.95%

2.10%

$0

Alliant Credit Union

1.90%

1.95%

2.00%

$1,000

TIAA Bank

1.85%

1.95%

2.00%

$5,000

Finding the right retirement investments is easier with the help of Human Interest. Contact us today for help finding a retirement plans that prepare your employees for retirement.

We believe that everyone deserves access to a secure financial future, which is why we make it easy to provide a 401(k) to your employees. Human Interest offers a low-cost 401(k) with automated administration, built-in investment advising, and integration with leading payroll providers.

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