Significance

• When you put money in the IRA, the money receives special tax breaks on the earnings while the money remains in the account. If you put money in a traditional IRA, you can take a tax deduction for your contributions. If you contribute to a Roth IRA, you can withdraw the money tax free at retirement.
  
  

Options

• You can invest money that is in an IRA in a wide range of investments, including stocks, mutual funds and certificates of deposit.
  
  

Definition

• A CD is an investment that requires the customer to leave the money in an account for a specified period in exchange for a fixed rate of interest. The interest rate will usually be higher than other bank accounts, but you will pay a hefty penalty if you withdraw the money before the CD matures.
  
  

Advantages

• CDs offer a guaranteed return and are insured by the Federal Deposit Insurance Corp. (FDIC) up to $250,000. Unlike stocks and bonds, which can lose value or be worthless if the company goes under, FDIC insurance protects your investment in case the bank fails.
  
  

Considerations

• If you are putting money aside for retirement using CDs, you should consider contributing money to an IRA and then investing it in CDs to get the tax advantages.