Investing in Your Future: Certificates of Deposit & IRA Accounts
At Rivers Edge Bank, we aim to be a resource ready to serve our communities when they need us. One way we do this is by supporting local residents with thinking long-term toward their financial futures. Two low-risk, relatively predictable investment options are certificates of deposit (CDs) and individual retirement accounts (IRAs). Both of these are great opportunities to give your future income a boost, whether your savings are going toward a big purchase or more stability in your retirement. For specific advice on whether a CD or IRA is right for you, we recommend consulting with your financial planner or tax preparer to discuss any tax implications.
When you’re ready to entrust your money to a long-term investment account, our CD investments and IRA accounts are designed to give you more control and confidence in your future. Your friends and neighbors at Rivers Edge Bank have your best interests in mind.
Certificate of Deposit (CD) Investments
Certificates of deposit are comparable to traditional savings accounts, but there are additional safeguards in place to help gain the maximum return on your investment. CD investments come with a lot of benefits and power for investors who take advantage of the security a CD provides.
What is a certificate of deposit and how does a CD work?
A certificate of deposit is invested as a lump sum that earns interest at a predictable fixed rate throughout the term of the investment, typically ranging from 90 days to five years. With CD investments, you can decide how much to invest and for how long, knowing your money is protected and gains are guaranteed.
As a Federal Deposit Insurance Corporation (FDIC)-insured bank, Rivers Edge offers FDIC insurance to cover certificates of deposit in case of any hardships befalling the bank. This is an extra step we commit to for added peace of mind and certainty for your return on investment.
Certificates of deposit can help money you’ve already set aside grow at a higher rate than a traditional savings account or money market account. For example, if you’re saving up for a major life event, down payment or education expenses, it makes sense to set some funds aside in a CD, where it will earn higher interest and ultimately add to your savings in the meantime. Because you are getting a greater return, CD investments are not meant to be accessed on an as-needed basis and are better for long-term planning. Early withdrawals are penalized with a fee. As long as you commit to your term length, a CD is fee-free. Rivers Edge Bank requires a minimum deposit of $500 and a commitment to keep the money in for your set term, otherwise withdrawals are subject to a penalty.
Interest Rates for CD Investments
Interest rates for CDs vary depending on the length of your term. The best CD rates are typically reserved for longer terms so investors can make the most of their money over a longer time period. Rivers Edge Bank is happy to work with you to determine an investment term and high interest rate that will help you reach your goals. Ask about our available term lengths below to get started:
- 91 Day
- 182 Day
- 12 Month
- 24 Month
- 36 Month
- 48 Month
- 60 Month
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Certificate of Deposit vs Savings Account
The main differences between a certificate of deposit vs savings account are accessibility and predictability. A savings account is always available to add new funds or withdraw as needed. With a CD, funds cannot be added or removed, but fixed interest rates allow your savings to grow at a regular rate throughout the term length. CD investments charge a penalty if the account holder needs access to funds before the term concludes, while savings account holders are only subject to fees after excessive withdraws. A CD is not meant to be used as an emergency fund and therefore requires more planning to make sure you feel comfortable keeping your funds preserved for the term length.
As a reward for the longer commitment, CD investments typically yield better returns, with higher interest rates helping your money accrue over time. Once you make your initial investment, the CD does all the work for you and will have a larger lump sum waiting for you when the term ends. Predictable, secure and dependable, CD investments remove the guesswork and grow your money at a steady pace. Savings accounts do add interest, but rates are typically lower and can fluctuate based on the interest rate environment. What you’re earning from quarter to quarter may change with the market, versus more significant growth guaranteed in a CD.
A certificate of deposit shouldn’t replace your savings, but investing a portion of your money into a CD can pay off if you’d like to supplement your potential earnings. When you need a friendly face to talk through CD investment options, Rivers Edge Bank is readily available to assist you.
Individual Retirement Accounts (IRAs)
Individual retirement accounts (IRAs) are similar to an employer-sponsored 401(k), but they are entirely controlled by the individual investor. IRA accounts are often considered a safe, conservative investment with tax benefits that help you save more over time.
What is an IRA?
An individual retirement account allows investors to diversify retirement portfolios and optimize investments for growth while taking on relatively low risk. IRA accounts offer tax-deferred or tax-free growth, meaning you won’t be taxed on your earnings while you’re saving or once you reach retirement age, depending on whether you open a traditional or Roth IRA.
Rivers Edge Bank makes it easy to establish an IRA account and customize a contribution plan that works for you. We’ll ensure you’re maximizing your account and earning interest to keep your account balance growing over time. The government does regulate IRA investments, but we’ll communicate openly with you to make sure you’re well within the annual contribution limits. IRA accounts are a great way to supplement an employer-sponsored 401(k), but anyone can benefit from an additional boost to your retirement savings to help gain traction as you move toward retirement. A few features of an IRA account at Rivers Edge Bank include:
- $1,000 Minimum Balance to Open
- Interest Paid Quarterly
- Interest Compounded Quarterly
- Variable Interest Rate
- Traditional IRAs and Roth IRAs Available
Traditional IRA vs Roth IRA
The main difference of a traditional IRA vs Roth IRA is how and when the money is taxed. In a traditional IRA, you won’t be taxed on your savings until you reach retirement age and begin making withdrawals. When you make contributions to your account, you can deduct that amount from your taxes each year, giving you more opportunity to increase earnings before you retire. By deferring tax payments, you’re increasing the amount of disposable income ultimately available to you in retirement.
With a Roth IRA account, you’ll pay taxes on your savings upfront, but once you start making withdrawals, your account will grow tax-free and you won’t pay taxes on your withdrawals. Depending on how much of a tax burden you anticipate being able to take on in retirement, a Roth IRA is definitely an option to consider. Roth IRAs don’t require a minimum distribution once you reach retirement age, so money can continue to grow untouched in your account. However, a traditional IRA requires investors to withdraw a minimum amount each year as taxable income once they turn 73. Rivers Edge Bank wants to help ease our community members into the comfortable retirements you’ve earned, so we’re happy to discuss potential options and help you decide whether a traditional or Roth IRA is right for your retirement goals.
Get in Touch with Rivers Edge Bank for Investment Opportunities
Rivers Edge Bank’s trusted team of personal bankers brings you the support and confidence you need to make financial moves that will pay off in the long run. As your local bank, we want you to take advantage of everything your future has to offer, and that starts with better, more personal banking now. Contact your local Rivers Edge Bank to get started saving with CD investments or your own IRA account.