IRA Savings Vs. IRA Certificates

Putting funds into a low-interest IRA savings account versus a higher-yield share certificate involves different considerations regarding risk, return, and financial goals.

An IRA share account is a retirement savings account with tax advantages, where you deposit money and typically earn a low interest rate, similar to a regular savings account. There is some flexibility with an IRA share account, as you can contribute to the account regularly and typically access funds without penalty (though withdrawals before age 59½ may be subject to taxes and penalties). However, the interest rates are typically lower than those offered by IRA share certificates, especially those with longer terms. The lower interest rates may mean your savings don’t keep pace with inflation.

An IRA certificate is a time-bound deposit account where you earn a fixed interest rate for a specific period of time (the term). Benefits of investing in an IRA certificate:

• Having a guaranteed, specific interest rate for the entire term makes them a low-risk option.
• Typically, certificates earn higher interest rates compared to traditional share accounts.

Some drawbacks may be that you generally face penalties if you withdraw your money before the IRA certificate matures, making it less accessible for unexpected needs.

When to choose which:

• If your priority is regular contributions, ease of access to your funds, or a desire for potential tax advantages on your savings, particularly for long-term retirement planning, an IRA savings account could be suitable.
• If you have a lump sum that you can lock away for a specific period to earn a higher, guaranteed return for a short-to medium-term goal, a certificate might be a good choice. You might also consider this if you are nearing retirement and want more conservative growth.

IRAs are generally insured by the NCUA up to the legal limit, usually $250,000 per person per account type per institution.

For more information on APCI Federal Credit Union IRAs, please call one of our IRA experts at 800-821-5104:

• Victoria Fernandes, Certified IRA Specialist, at ext. 6887
• Ann Strohl, Certified IRA Specialist, at ext. 6888