IRA Comparison Rates

Uncle Sam provides tax benefits for your IRA savings account.

An IRA allows many investment options. For a conservative investor, CDs and fixed annuities offer predetermined rates based on set time frames. You can check Bankrate.com or Bankaholic.com to find current CD rates or call local banks and credit unions for current rates.

Time Is Money

Consider when you will need to access funds from your IRA and choose an appropriate maturity date. Make sure you compare rates for equivalent maturities. A longer time frame will generally pay you a higher yield.

Rate vs. Yield

Fixed rates are quoted based on a 365-day year. The rate expresses simple interest without calculating the effect of compounding. The annual percentage yield (APY) tells you the compounded interest you will earn after you've invested for one year. Comparing the simple rate with the APY will give you an inaccurate comparison.

Warning

CDs and annuities impose penalties if you withdraw funds prior to maturity. A long-term rate may lock you at a low percentage so that you can't take advantage of rising interest rates. Accepting a lower rate allows you greater liquidity. Watch for teaser rates that may end prior to maturity.

References

• IRS: Publication 590, IRAs
• MSN Money: What Should I Invest In?

Resources

• Bankrate
• Bankaholic