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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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DETAILSINSTITUTIONAPYMINMAXPRODUCT
Ally Bank1.10%--IRA Raise Your Rate 2-Year CD (Traditional,Roth,SEP)
Discover Bank1.05%$2,500-24 Month IRA (Traditional,Roth)
Ally Bank0.99%--IRA High Yield 12-Month CD (Traditional,Roth,SEP)
Discover Bank0.95%$2,500-12 Month IRA (Traditional,Roth)
Pentagon Federal Credit Union0.90%$1k-2 Year IRA
Pentagon Federal Credit Union0.80%$1k-1 Year IRA
Accounts mentioned in this post. Rates as of April 16, 2014

Ally Bank to Offer IRA CDs - How It Might Compare to Discover Bank and PenFed

POSTED ON BY

Update 6/28/2011: Ally is now offering IRAs. Please refer to this new Ally IRA post for more details.

A reader mentioned in an email that Ally Bank will soon be offering IRA CDs. I just checked with Ally Bank, and a customer service rep confirmed that this is true. According to the CSR, they expect to launch the IRA CDs before the end of the year. Unfortunately, he wasn't able to provide any details about the IRA CDs.

I asked if the savings account would also be an option in the IRA. He wasn't sure, but he said it didn't seem likely due to the nature of IRA accounts. You probably don't want to keep IRA funds in a savings account for a long period of time since it typically has a lower interest rate than CDs. However, a savings account is useful if you plan to move your funds to another institution since you don't have to worry about CD early withdrawal penalties. This may not be much of a concern at Ally Bank since Ally's CD early withdrawal penalty is only 60 days of interest (see post).

Discover Bank IRA Certificate of Deposit

Ally Bank's IRA may look like what Discover Bank offers. Discover Bank's IRA can only hold CDs. Discover does not offer a savings account in the IRA. To transfer the IRA funds to an IRA at another institution, you may want to wait for the CD grace period (up to 9 calendar days after the maturity date). Otherwise, Discover Bank will likely charge an early withdrawal penalty. I just confirmed this with the Discover Bank CSR this morning. If you have multiple CDs in your Discover Bank IRA with different maturity dates, transferring the IRA funds without an early withdrawal penalty can be complicated.

Note, I'm not considering any penalties by the IRS. You shouldn't have to worry about taxes or IRS penalties if you transfer or do a rollover from one institution IRA to another institution IRA.

PenFed IRA Certificates

Some institutions allow you to have a savings account in your IRA. This is common at credit unions. Pentagon Federal Credit Union is a good example. Its IRA savings account doesn't pay much interest, but it can be useful when your IRA CDs mature. When your IRA CDs mature, you can move those funds into the IRA savings account. Once in the IRA savings account, you can do an IRA transfer to an IRA at another institution without worrying about CD early withdrawal penalties.

Another nice feature regarding PenFed is that they do allow penalty-free partial withdrawals from your IRA CDs once you have reached 59½. I have more details on this feature in this post.

To see how the CD early withdrawal penalties compare between Discover, Ally and PenFed, please refer to this post. For more details on IRAs and IRA CDs, please refer to the post What's So Special About an IRA CD?.

  Tags: Ally Bank, CD rates, IRA rates, Pentagon Federal Credit Union, Discover Bank

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Comments
9 comments.
Comment #1 by Anonymous posted on
Anonymous
Didn't someone mention this on FatWallet more than a month ago?

9
Comment #2 by Anonymous posted on
Anonymous
regarding the discover banks ira,i do not understand why there would be an withdrawal penalty if the cd had already matured and why wait until day 9 to do this?

2
Comment #3 by Anonymous posted on
Anonymous
Yep.  It's right there at the top of the last page in the Ally Bank thread.

Hoy, Ken, you're falling behind!

5
Comment #5 by Anonymous posted on
Anonymous
Does anyone know if you can pull funds from an IRA MM account into an IRA with a brokage e.g. Initiate an ACH transfer from your IRA brokerage e.g. TD Ameritrade to pull IRA funds from an Ally IRA MM account?

1
Comment #6 by Anonymous posted on
Anonymous
Whatever happened to Ally Bank starting to offer IRA cds????

1
Comment #7 by Anonymous posted on
Anonymous
I heard from the Ally Bank CSR that the IRA product is being launched in a couple of weeks.

1
Comment #8 by Anonymous posted on
Anonymous
I just saw the IRA CDs now being offered in the Ally Bank website.  They have the smallest penalty - 2 months interest - if you break them early.

1
Comment #9 by Anonymous posted on
Anonymous
Ally Bank posts interest on IRA CD accounts ONLY once per year, on Dec 31st! 

Their quarterly statements show accrued interest for the statement period, but the ending balance DOES NOT include the accrued interest because they have not posted [paid] it.

Fooey with that practice.  I lodged a complaint with FDIC and the State of Utah Dept of Financial Institutions where Ally Bank is headquartered. 

1