IRAs, CDs, and Savings: What?s Best for Your Future?

At NobleBank, we offer a number of options for both short and long term savings. Read below to find out what’s right for you!

IRA

Individual Retirement Accounts, or IRAs, are savings accounts with tax benefits where you can store investments, such as stocks, bonds, or mutual funds. You choose where the money in the account will be invested, and returns are based on the performance of the investments themselves. These accounts are a common option for retirement savings, and—depending on how you choose to invest—can be a very secure way to build money over the years.

IRAs are regulated by the Internal Revenue Services (IRS), who set the rules on eligibility, contributions, and distributions. They also determine the tax treatment for different IRA accounts. To date, there are two types of IRA accounts: Traditional IRAs and Roth IRAs.

Traditional IRA contributions are tax deductible on both state and federal tax returns for the year you make the contribution, while retirement withdrawals are taxed at ordinary income tax rates.

Roth IRAs, on the other hand, provide no tax break for contributions, but earnings and withdrawals are generally tax-free. For more information on the difference between Roth and Traditional IRAs, just follow this link.

CDs

CD is short for Certificate of Deposits. Unlike IRAs, CDs can be jointly owned and don’t offer the same tax or investment benefits. They’re also administrated by a bank, broker, or credit union instead of the IRA. CDs are more like a regular savings account, except they earn a higher rate of interest, and can’t access the funds until they have “matured” over a determined period of time (often between 1 month to 5 years, or longer), and which point you receive the accrued interest plus the principle.

CDs are a great option if you’re looking to save towards a particular goal, such as college or a nest egg for a future venture. There are a number of different CDs for different goals.

Savings Account

Savings accounts are the simplest and most common saving instruments available. Money stored in a savings account will earn interest, but at a lower rate than a CD. You can also access the funds at any time with no penalty.

While money in a savings account will continue to earn interest for as long as you keep it there, they are better suited short term savings or emergency funds.

Money Market Account

Money market accounts typically pay more competitive rates than a standard savings account. The rates are tiered – so they more you have in the account, the higher the rate. There are some restrictions on this account. Follow this link to learn more.