What Is An IRA Certificate Of Deposit And How To Use It In Your Retirement

There are many different financial products that can help an investor save for retirement. One of the most popular investment products is the individual retirement account, also known simply as the IRA. IRAs can come in several varieties. There is an IRA for every type of investor and his or her tax situation. Traditional IRAs allow individuals to invest in usually mutual funds on a pre-tax basis where the investor would be taxed at the time of withdraw. There is also a Roth IRA which enables an investor to use after tax dollars to invest in a mutual fund and withdraw all of the capital gains, interest, and dividends tax free in retirement. There is also a self-directed version of both the Traditional and Roth IRAs where investors can dictate the types of investments that are held in the retirement account. An investor can hold individual stocks, bonds, certificates of deposit, real estate, options, and a host of other investments in an IRA.

What Is An IRA Certificate of Deposit?

Inside an IRA, an investor can own a certificate of deposit which can also be referred to as an IRA CD. An investor can own either a traditional IRA or a Roth IRA with certificates of deposit inside the accounts. An IRA CD is simply a regular certificate of deposit which is contained within an IRA account earmarked for retirement savings. Most brokerage firms can help investors set up self-directed IRA and purchase the securities such as a certificate of deposit to place inside the account. With a Roth IRA CD, you receive the tax advantages of a Roth IRA with the enhanced security that comes from owning a certificate of deposit.

How To Incorporate IRA CDs In Your Retirement Nest Egg

While most retirement accounts contain stocks and bonds, certificates of deposit can provide a larger rate of return on an investment portfolio's cash position rather than just parking the money in a savings account. Using an IRA, whether it is traditional or the Roth version, can help you shield a portion of your assets from taxes either now or in the future.

An Individual Retirement Account (IRA) is one of the most versatile investments a person can own. The limits of what an investor can do and invest in with these types of accounts are almost only limited by his or her imagination. Certificates of deposit inside an IRA provide investors an additional alternative to the standard savings account.

Hank Coleman is the founder of several financial blogs, focusing on topics such as how plan for retirement and find profitable investing opportunities. He is an entrepreneur and professional in the government sector. Hank holds a Bachelor's degree in Business Administration, a Master's in Finance, and is currently studying for his Certified Financial Planning (CFP) credentials. Always looking for a trusted financial institution for advice and tips he tends to look up information at http://www.discoverbank.com more often than not.

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