When December rolls around, people tend to reflect on the year that is coming to a close and look ahead toward the future. If saving money is something you struggled with in 2019, then we would like to help you build savings that will grow in 2020.
CDs and IRAs are two great places to watch your savings grow.
A Certificate of Deposit, or CD, is a savings account that gives you a higher interest rate for a specified amount of time. When you open a CD you are agreeing to put money away for a defined period of time for a guaranteed rate of interest. CDs are considered low risk because they have a predictable rate of return and are insured by the FDIC. Keep in mind that once you deposit the funds into the CD you will not have access to the cash unless you are willing to pay the penalties for an early withdrawal.
An Individual Retirement Account, or IRA is a savings account that gives you significant tax benefits. The money you deposit into your IRA grows tax free or tax deferred. There are several different types of IRAs to choose from but the two most common are the Traditional IRA and the Roth IRA. With a Traditional IRA, you do not pay taxes until you withdraw the money. Anyone with an income can contribute funds directly into a traditional IRA before paying taxes on the money. With a Roth IRA, you pay taxes at the time you deposit money into the account. There are income limits associated with a Roth IRA but there is also more flexibility when making withdrawals.
Determining whether a CD or an IRA would be best depends on your savings goals. If you are looking to set some money aside for a shorter period of time and know that you will not need to touch the money, a CD is a wonderful choice. If however you are looking for a long term savings plan that will help you build your savings for retirement, an IRA is great start.
If you still aren’t sure which type of account would be best, we encourage you to visit our website to find out the specifics associated with either a CD or IRA. Our staff would be happy to answer any questions so feel free to give us a call at 845-895-2051 or stop by one of our branch locations.