IRA Savings Accounts
Written by Theresa Stevens
An IRA savings account combines the features of a savings account with the tax advantages of a retirement account. Use the filter box below to customize your results, or click here to learn more about IRA savings accounts, including how they work and how to open an account.
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What is an IRA savings account?
IRA savings accounts are tax-advantaged savings accounts. They are designed to be a low-risk way to save for retirement. An IRA savings account does not invest your money in securities such as stocks and bonds.
As with a regular savings account, your money is covered by Federal Deposit Insurance Corp. (FDIC) insurance up to $250,000.
IRA savings account vs. IRA investment account
A typical IRA investment account includes securities, which means greater growth potential than an IRA savings account but also greater risk. While an IRA savings account is generally the safer option, it provides more modest returns and presents the possibility that your money will lose value due to inflation.
How does an IRA savings account work?
An IRA savings account is similar to a regular savings account but with extra tax benefits. With a savings account, you pay taxes on any interest you earn the year you earn it, while you don’t pay taxes on an IRA until you make withdrawals.
Unlike a standard savings account, an IRA savings account has a contribution limit, which counts toward your annual IRA contribution limit. The limit for the 2024 tax year is $7,000 ($8,000 if you’re age 50 or older). The limits for 2025 are the same.
That means if you contribute $5,000 to an investment IRA, you can deposit only $2,000 into an IRA savings account (assuming you’re under the age of 50).
IRA savings account rates
Banks and credit unions usually offer rates on IRA savings accounts that are comparable to those offered on their savings accounts — some of which are high-yield rates. Online banks tend to offer the highest IRA savings rates.
Here are IRA savings account rates at a few popular banks and credit unions:
- Ally Bank: 3.50% annual percentage yield (APY)
- Discover®: 3.60% APY
- Navy Federal Credit Union: Up to 0.25% APY
Different types of IRAs
Traditional IRA
Traditional IRAs protect your earnings from taxes until they are withdrawn, as opposed to earnings from a non-IRA savings account that you pay taxes on each year. Contributions to a traditional IRA are tax deductible for the year in which you make them. However, this benefit is phased out once you reach a specific income limit.
Roth IRA
Roth IRA contributions are not tax deductible; however, withdrawals during retirement are tax-free. Unlike traditional IRAs, Roth IRAs don’t require minimum distributions once you reach a certain age.
Roth and traditional IRAs may be available with options such as variable, fixed and step-up interest rates. Most interest rates are calculated daily and paid monthly.
Read more: Traditional IRA vs. Roth IRA
Pros and cons of IRA savings accounts
Before choosing an IRA savings account, make sure you understand the benefits and drawbacks.
Pros
- Provides tax benefits: The earnings in an IRA savings account grow tax-deferred, meaning you won’t pay taxes until you withdraw funds. With a Roth IRA savings account, qualified withdrawals are tax-free.
- Includes FDIC insurance: The money in an IRA savings account is covered by FDIC insurance.
- Offers liquidity: IRA savings accounts are more liquid than IRA investment accounts, providing easier access to your money because you don’t have to sell investments.
Cons
- Limits contributions: Unlike regular savings accounts, IRA savings accounts restrict how much you can contribute yearly.
- Sets specific withdrawal rules: Because IRAs are designed for retirement, withdrawing funds before the age of 59 ½ will result in penalties and fees unless you qualify for an exception.
- Produces lower returns: IRA savings accounts may have lower returns compared with IRA investment funds because the savings accounts aren’t invested in the stock market.
How to open an IRA savings account
1. Determine your eligibility
First, make sure you meet the requirements to open an IRA savings account. Anyone with taxable income is eligible; however, you must fall under a certain income threshold to contribute to a Roth IRA. Here are the Roth IRA income limits for 2025:
- Single tax filing status: Modified adjusted gross income (MAGI) must be less than $150,000 to make a full contribution.
- Married filing jointly: MAGI must be less than $236,000 to make a full contribution.
2. Compare providers
When shopping around for an IRA savings account provider, some factors to keep in mind include fees and minimum deposit requirements. You’ll also want to make sure the bank you choose offers the account you wish to open, whether that’s a traditional or Roth IRA. Some banks offer simplified employee pension (SEP) IRA savings accounts for business owners.
3. Open the account
Once you find a good bank or credit union, you’ll need to apply for an account. The process varies slightly depending on the financial institution but can typically be done online or by phone with a customer service representative. You may need to provide a government-issued ID, such as a driver’s license or passport, and your Social Security number or tax identification number.
4. Fund the account
Once you’ve been approved for the account, the next step is to deposit funds up to the annual contribution limit. You don’t have to deposit the full amount at once. Instead, you can set up automatic transfers to contribute money each month or at a frequency that works best for you.
Alternatives to IRA savings accounts
IRA certificate
An IRA certificate works like a traditional certificate of deposit (CD) but is held within a tax-advantaged IRA. Like a traditional CD, it locks up your money for a fixed term, typically ranging from three months to five years.
If you withdraw funds before the term ends, you might need to pay an early withdrawal penalty. Because this is a retirement product, if you’re under the age of 59 ½, you’ll pay additional penalties and fees.
IRA money market account
IRA money market accounts typically earn competitive interest rates and offer the same tax benefits as IRA savings accounts.
High-yield savings account
Sometimes a non-IRA high-yield savings account will have the best interest rates; however, you won’t get the tax advantages that come with an IRA savings account. Keep in mind that high-yield savings accounts are typically offered by online banks versus traditional brick-and-mortar financial institutions.
Traditional CD
Another option is a traditional CD, which will earn a guaranteed rate over a term that you choose, such as one year or three years. Unlike an IRA certificate, a traditional CD usually has no contribution limit, making it a good option if you want to deposit a large sum. But you won’t get the same tax benefits as with an IRA certificate.