What Is an IRA CD?

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An IRA CD is money placed in an IRA that has been put towards a certificate of deposit in order to earn money without taxes. Find out about penalties for early withdraw of money in IRA CDs with information from a registered financial consultant in this free video on money management.

Part of the Video Series: Money Management & Personal Finance
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Video Transcript

This is financial adviser Patrick Munro talking about what is an IRA CD. Well an IRA is a qualified account that any individual tax payer who has a right to save for their retirement is allowed to do so. And IRAs come in various forms and fashions as a result of the benefits bestowed upon you as a tax payer. To find out more information about IRAs you can go to the IRS website which is at irs.gov and you'll see the various reporting systems that are required for IRAs and how much you can contribute in a given year. If you choose to place your retirement contribution in a CD or certificate of deposit, that is offered by a bank. Presumably your bank and there's an interest rate that's placed on the monies that you give the bank but they code the money as qualified money as opposed to regular monies so once you put the money in under an IRA, you no longer have to pay taxes on the contribution and it can grow tax deferred under IRS guidelines. However if you take the money out early you'll face a penalty from the CD at the bank as well as tax penalties as well. This is financial adviser Patrick Munro talking about the benefits of IRA CDs.

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