Your guide to CDs, Money Market and IRA accounts

Understanding CDs, Money Market Accounts, and IRAs

Looking to make the most of your savings? There are several great ways you can do that - you just have to understand your options. IRAs, CDs and Money Market Accounts all have their own advantages. See how they're different and find out which type of accounts may be right for you.

Certificate of Deposit (CDs) 

CDs are a great way to deposit money into an account and watch it grow over a set period. It's important to keep in mind that once you deposit money into a CD, you can't withdraw it until the agreed-upon date of maturity.

About CDs

• Enjoy a high interest rate: CDs typically yield higher interest rates than traditional savings accounts or money market accounts.

• Set period of maturity: The maturity date is how long you promise to leave the funds in the account, untouched. In general, longer maturity term accounts offer higher interest rates. Typical maturity rate options range from 3 months to 5 years. 

• Your money is safe: The Federal Deposit Insurance Corporation (FDIC) insures your deposits up to $250,000 per depositor, per FDIC-insured bank, per ownership category. 

Money Market Accounts (MMAs)

MMAs are accounts used for short-term savings that still allow limited access. Interest rates are typically higher than traditional savings accounts, and many MMAs allow you to access your money through checks, transfers and debit cards.

About Money Market Accounts

• Lower interest rate than CD or IRA: The flexible access of MMAs means that banks cannot reinvest your money as readily, and interest rates are not as high as you will see in a CD or IRA. However, MMAs typically have higher minimum balance requirements than traditional savings accounts, which are rewarded with higher interest rates. An MMA is a smart option for short term or flexible savings.

• Easy access to your money: MMAs will not tie up your money like some other savings options, meaning you will be able to access your money when you need it.  

• Good for emergency funds or short-term savings: MMAs produce higher yields than traditional savings accounts, making it the perfect place to store emergency funds.  

• Your savings are secure: MMAs are insured by the FDIC.  

Individual Retirement Account (IRA)

Thinking about saving for the long-term? Then consider an IRA - an account regulated by the IRS that offers many tax advantages.

About IRAs

• Grow your savings at a high interest rate: IRAs are investment deposits held in stocks, bonds and mutual funds. They typically yield higher interest rates than other savings options; however, the value of these investments can fluctuate, making IRAs a riskier investment opportunity.
• Choosing between a Traditional or Roth: When you deposit money into a Traditional IRA your contributions may be tax deductible. Investments grow tax-deferred, which means taxes are not paid until funds are withdrawn. Money contributed to a Roth IRA, on the other hand, is made after tax, but the investments grow tax-free. One of our financial specialists can help compare the growth and savings options between the two types of IRA investments.  
• Potential tax penalties: A traditional IRA matures when the account holder reaches 59 ½ years old. Any withdrawals made before that time are subject to a 10% tax penalty, regulated by the IRS. Deposits made into a Roth IRA have already been taxed and may be taken out at any time. The accrued interest may not be withdrawn early without penalty.  

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