Certificate IRAs give you another way to save for retirement
When it comes to building that nest egg, you have several tools to help you.
A sometimes-overlooked retirement investment strategy is using a term-share certificate Individual Retirement Account. It’s the credit union’s version of the Certificate of Deposit.
At Dupaco, you can choose a certificate term, from 18 to 60 months, and earn a fixed rate of return during that time. Interest adds into the account every six months, so you also earn interest on that additional amount, reaping the benefits of compound interest.
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It can be a good investment option for someone close to retirement or anyone who has a low risk tolerance.
Generally, though, the market will yield a larger rate of return over time, so it’s important to speak with a financial advisor to ensure you’re investing your retirement funds the best way for you.
Is a term-share certificate IRA a good fit for you?
You might consider adding IRA certificates to your portfolio when you:
- Have a larger balance you want to invest on a one-time basis.
- Are looking for a higher interest rate than an IRA savings account.
- Want a guaranteed rate of return, as opposed to a variable rate or investing in the market, where you could lose principal.
- Want the funds to be insured. At Dupaco, IRAs are insured separately by the NCUA up to $250,000.
What to consider before using certificate IRAs
Before using IRA certificates, it’s important to understand how they work:
- At the end of the term, you have a 10-day grace period to change your IRA investments. Otherwise, the IRA certificate will automatically renew at the rate in effect at that time.
- Retirement age is 59½, so taking funds out of an IRA before then could result in IRS penalties as well as tax consequences.
- Dupaco allows members age 59½ or older to withdraw 20% of your IRA certificate balances each year penalty-free.
- Dupaco charges a 12-month loss of interest if funds are taken out before the certificate maturity date.
At some point, certificate IRAs usually come into play for most people saving for retirement.
