Should you Invest with Discover Bank’s IRA CD’s?

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Independent Retirement Accounts (IRA’s) are excellent vessels to begin planning for your retirement, no matter how old you are.  The more you can invest now, the better off you’ll be when it comes time to hang ‘em up, especially since Social Security may not be around when you retire.  Depending on the type of IRA you contribute to, you can either make tax free payments towards your retirement, OR withdraw the money you’ve earned from your IRA tax free.  The method you choose is up to you but one of the investment methods you may want to consider when contributing to an IRA is by utilizing Discover Bank and their IRA CD’s.

An IRA CD is similar to any other certificate of deposit in that the money is invested in a specific term and cannot be used before the CD matures.  The term length of IRA CD’s ranges from three months all the way up to 10 years, and because money cannot be withdrawn from your IRA, without penalty, a CD is a great place to keep your money safe and secure.  Let’s take a look at the current (as of 10/25/11) Discover Bank IRA CD rates.

Term Length
Interest Rate
APY
3 months
0.40%
0.40%
6 months
0.75%
0.75%
9 months
0.80%
0.80%
12 months
1.00%
1.00%
18 months
1.04%
1.05%
24 months
1.14%
1.15%
30 months
1.19%
1.20%
3 years
1.34%
1.35%
4 years
1.54%
1.55%
5 years
1.73%
1.75%
7 years
1.98%
2.005%
10 years
2.42%
2.45%

You’ll notice in the table above, that the Interest rate and APY values vary slightly and the longer the term, the larger the difference in these numbers. It’s important to note that the APR and APY are different, however the rate of return that you will see on your money is always the APY.   When you compare these interest rates with what Discover offers for regular CD’s, you’ll find the numbers to be identical.  There is no added benefit in the interest rate IRA customers will receive, however Discover is one of the few online banks to offer an IRA CD.

An IRA CD is designed for the safe investor, who is looking for a guaranteed return.  Most Roth and Traditional IRA’s are opened with brokers, both brick and mortar and online.  The return of your investment in the stock market can sure beat 3% annually over 10 years, but there’s no guarantee just how much you’ll earn, OR how much you’ll lose.  A 10-year IRA CD at 3% may not sound like a big money maker, but you’ll increase your investment by almost 50% and with the continued drop of interest rates, consumers may soon be paying banks interest to keep their money!

Discover Bank CD

Published or Updated: March 6, 2013

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