Roth Ira Cd Rates

Roth IRA Cd Rates

An IRA is an acronym for "Individual Retirement Arrangement". The IRA itself is not an investment, it is an account that holds investments of your choice. The Roth IRA has special tax and other benefits you may want to know about.

With a Roth IRA how you invest is up to you. There is no minimum annual contribution and you choose the places you would like to invest, for example in CD's or mutual funds. Many people choose CD's because the rates are guaranteed, unlike stock market mutual funds where the return is based on the stock market going up or down.

You can start your Roth IRA at any age and there is no mandatory withdrawal age -- keep your money in your Roth IRA CD account, as long as you like. Roth IRA contributions are made with "after-tax" dollars. This means you fund your account with money that has already been taxed, like what is left after taxes in your pay check. Since you have already paid the taxes on this money, you do not have to pay again when you withdraw your funds from your Roth IRA CD.

The best news is that the money you EARN on this is tax free also. There are just two rules about getting these funds tax free. One is that you must be 59½ and the other is that you must have held the IRA for 5 years. Roth IRA is like a savings account. You can take your money out at any time if you need it -- tax-free -- because the money you put in has already been taxed. Withdrawing the interest tax free would be subject to those two rules -- age 59 1/2 and having the account for 5 years.

The 2009 maximum contribution limit is $5,000 for the year. If you are over age 50, you may contribute an additional $1,000 called a "catch-up" contribution. The best rate you can get for your Roth IRA CD account is whatever the current bank CD rates are. This will vary depending on the bank you choose, the amount you have to invest and the length of time you ask the bank to hold it for you.

The best Roth IRA CD rates vary from .25% - 3.64% with investments from $100 to $50,000 and time from 3 months to 5 years. Banks and brokerage houses are both good sources of IRA CD's and some brokerages houses, such as Fidelity and Merrill Lynch, can offer you CD's from several different banks. So actually,the best Roth IRA CD's are the ones that suit your individual investing needs right now.