Choosing to invest in a Roth IRA, CD or any other type of investment can help provide you with a bright financial future. However, choosing the best investment vehicle for your needs is critical. If you are choosing between a Roth IRA and a CD, there are several things that you need to consider.

Investment Goals

When it comes to choosing between putting your money into a Roth IRA and a CD, you need to determine what your investment goals are. Typically, investing in a CD is a short-term proposition. Some CDs last for as little as a month, while others go for long as five years. With a Roth IRA, the minimum amount of time that you can keep your money in the account is five years. Generally, Roth IRAs are a much longer-term investment than a CD. Decide what your investment time frame is and then consider which one of these two would fit your needs better.


A CD, or certificate of deposit, is an investment that is widely available at any bank. With this type of investment, you deposit a certain amount of money with the bank for a predetermined period of time. During that time period, the bank will pay you a guaranteed rate of interest. If you try to take your money out during this period, you will have to pay a penalty in order to withdraw it. With a CD, your money is FDIC-insured. Therefore, this represents an extremely safe form of investment that provides you a guaranteed rate of return.

Roth IRA

A Roth IRA is a retirement account that is funded with after-tax dollars. You can contribute as much as $5,000 in a given year. If you are over the age of 50, you can put as much a $6,000 into this type of account annually. Once the money is in the Roth IRA, you can choose to invest it in a number of different securities. For example, you could use the money to purchase stock, bonds or mutual fund shares. Many people allow an investment adviser to handle the money for them. The money is allowed to bring in returns and accumulate on a tax-free basis. Once you reach the age of 59 1/2, you can start withdrawing from the account without incurring any tax liability on the money. When you open this type of account, you cannot start taking withdrawals from your earnings for at least five years, even if you are past the age of 59 1/2.

Choosing between the Two

In order to choose between these two types of investments, you need to determine what you want to do with the money. If you want an extremely safe place to put your money for no more than five years, then a CD is going to be the better bet. However, if you are saving with the goal of retirement in mind, a Roth IRA will allow you to bring in a higher return and take advantage of a great tax situation.

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