IRA savings accounts provide a means of saving for retirement without having funds locked up for a set amount of time. Use the filter box below to customize your results, or click here to learn more about the primary types of IRA Savings Accounts.
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IRA Savings Accounts
What is an IRA?
One way to explain an IRA Savings Account is that it is a tax-deferred retirement investment vehicles that grow savings over time while keeping deposited funds fairly liquid and free. Banks and credit unions usually offer interest rates on these accounts that are very comparable to the rates offered on their savings accounts – some of which are high yield rates. The most common types of IRAs are the Traditional IRA and the Roth IRA, as you can see in the rate table above. When you decide to open an account, at most financial institutions you will have to select either the Traditional or Roth option.
The Traditional IRA
Traditional IRAs protect your earnings (called dividends by most credit unions) from taxes until they are withdrawn, as opposed to earnings from a non-IRA savings account that you must report to the IRS on a 1099-INT. Contributions up to a certain limit, which differs from year to year, are tax deductible in a Traditional IRA for the year in which they are made.
The Roth IRA
Roth IRA contributions cannot be deducted, on the other hand. Withdrawals (or distributions) are what give the Roth an advantage, though, as you can take a tax-free distribution for any reason after 5 years from the date of your first contribution. There are even several exceptions to the 5-year period that allow for tax-free distributions, including reaching the age of 59½, becoming disabled, or making a first-time home purchase. Unlike the Traditional IRA, the Roth version does not require distributions based on age. The Roth IRA is probably most similar to a standard savings account after 5 years, as you are able to deposit and withdraw in a similar fashion (usually 6 withdrawals a month).
Within those IRA options, banks and credit unions sometimes offer various features when it comes to the interest rate attached to the account, such as variable, fixed, and step-up rate features. Most interest rates are calculated daily and paid monthly.
An IRA Savings Account could be useful if you are moving earnings out of another IRA investment, such as an IRA CD. By moving earnings from an IRA CD that has reached maturity into an IRA Savings Account, you can avoid paying taxes on earnings. If and when you decide to open an IRA Savings Account, make sure there are no fees associated with account management. Also, remember to assign a beneficiary to the account.