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2-Year IRA CD
The 2-Year IRA CD, or 24-Month IRA, is a tax-advantaged savings account that functions as a time deposit with a specific maturity date and set interest rate. An easy way to understand this product is to picture a big circle titled “IRA” with a little circle titled “CD” inside of it. The CD is the means by which the IRA gains value or interest. When you open an IRA CD, the IRA remains constant and the time deposit (i.e., the certificate of deposit) earns interest that is added to the account, typically on a monthly basis.
The IRA remains constant in the sense that it comes with rules that govern how an investor may use its tax advantages. You can liquidate an IRA CD at any point, but the proceeds will be subject to income tax or penalties when they lose their “IRA” covering. The IRS sets the contribution limits (which typically change every year) and distribution terms (which differ for Traditional and Roth accounts). CESA (Coverdell Education Savings Account) and SEP (Simplified Employee Pension) plans are also IRA options usually offered by banks and credit unions listed on DepositAccounts.
If you liquidate, or close out, a 2-Year IRA CD when the CD matures and decide not to roll the proceeds over to another IRA, you must report the money as taxable income. For banks and credit unions insured by the FDIC or NCUA, respectively, each individual depositor is insured up to $250,000 per institution. This is important to keep in mind if you plan to move the funds in your IRA in and out of CDs to take advantage of prevailing interest rates.