IRA or CD?

Question

I have about $30,000 in a CD account and the interest is 5.15% APY. I don't think I will be using this money before I reach 66. I am currently 35.
Should I keep this CD account or transfer to IRA?
What would be the best way?
BTW... I do have 401K thru work.

Answer 1

There are limits on how much you can put into an IRA each year.

If you have a 401K, it reduces your allowable IRA contribution.

You have to ask a tax professional how much you can put in.

Or, put part of it in U.S. Savings Bonds.... in a CD you pay income tax on the interest every year, with Savings Bonds, you don't pay income tax on the interest until it matures and/or you withdraw it. By the time you're 65, you'll be retired, in a lower tax bracket, and can pay less income tax then.

Answer 2

You should consider opening a Roth IRA. I suggest you contribute your money yearly up to pre-set limit that you are allowed. For 2007 it is $4,000 and for 2008 it is $5,000. The amount you contribute into your 401k does not affect your contribution limits into a Roth IRA. What does affect the limit is if you have a any other type of IRA. For example, a traditional IRA. The benefits of a Roth IRA is that you would contribute you money today (no tax return deduction today), but any distribution made after the age of 59 and 1/.2 would be tax free to you including any appreciation. WIth a Cd the appreciation is taxable (i.e. interest income) every year and this affects your yearly return on investment. One of the things that is rarely known about a Roth is that if you ever needed to take out the money from your Roth IRA before the preset date, it is tax-free up the amount of principal that you contributed from the time of inception. Please note that you are NOT to take out any amount that comes from appreciation becuase this is taxable to you and there is a penalty imposed in addition to ordinary income tax rates.

Hope this helps.

333

Answer 3

401 K if they match what you put in. If not consider a money market acount. More liquid than a CD and no penalties unlike a IRA or ROTH IRA.

Answer 4

Look into a roth ira. You paid taxes on the money already. If you put the money into a roth ira, you can withdraw your 30k at any time (the interest not until you are retired).

Answer 5

You can not cash in a IRA before a certain age without a penalty.

If you do want to open one--just open one with the max amount allowed by the IRS per year.

Check the rates and terms before you change.

Answer 6

You can start to feed it into a Roth IRA, but the annual contribution limit for 2008 is $5,000.00.