Saving enough for retirement remains a daunting goal for many Americans. A 2018 survey by financial services company Northwestern Mutual found 41% of respondents worried about their retirement savings. Individual retirement accounts (IRAs) can help keep your blood pressure down by providing you with a powerful savings tool for retirement with significant tax advantages.
While you may associate IRAs with investing in stocks and bonds, one of the safest places to open an IRA is with a bank or credit union in the form of a savings or money market account. The list of IRA savings accounts below are the best for earning a high interest rate on your savings while keeping your future nest egg secure.
The top 10 IRA savings accounts of December 2021
Premier Members Credit Union IRA Money Market Account (Traditional, Roth) — 2.00% APY, $5 minimum deposit
Premier Members Credit Union is the merged company formed by two well-established credit unions: Boulder Valley Credit Union and Premier Members Federal Credit Union. It caters to residents of Colorado, but you can also join through their affiliation with Boulder Valley School District’s charity Impact on Education. It’s worth noting that you’ll only earn this high APY on your first $2,000. After that, the rate drops down in tiers.
Patelco Federal Credit Union Money Market Select IRA (Traditional, Roth, CESA) — 1.00% APY, no minimum deposit
Patelco Federal Credit Union’s rate is dependent on the size of your deposit. This APY decreases the more money you have invested; the rate begins dropping after $2,000. Patelco is based in California, and you’re eligible to join if you live, attend school or worship in certain California communities. Students at a few universities also qualify, as do employees of one of their member companies and associations. If none of these apply to you, you can also join by becoming a member of the nonprofit Financial Fitness Association, and your first year is on the credit union.
Anyone can become a member of Communitywide FCU by joining the Michiana Goodwill Boosters, the Marine Corps League of St. Joseph Valley or Habitat for Humanity Helpers. Communitywide offers both traditional IRA and Roth IRA accounts, with a $2,000 deposit needed to open, with dividends paid into the account on a monthly basis. You’ll need to contact the credit union directly by phone to open an account, as you cannot open an IRA account online right now.
Signature Federal Credit Union IRA Savings — 0.70% APY, no minimum deposit
Membership in the American Consumer Council qualifies you to join up with this Virginia-based credit union, which offers Traditional, Roth and CESA IRAs. The barrier to funding these IRAs couldn’t be lower—there’s no minimum deposit required, meaning you could open an IRA savings account with the change you find under a couch cushion (though we recommend trying to save more for your retirement). The APY should also entice you, as the interest earned starts to rapidly drop off the further you get down this list.
This North Carolina credit union offers its banking products to anyone in the nation so long as they make a one-time $10 donation to the Latino Community Development Center, a nonprofit promoting financial literacy and general economic development “for low-income Latino and other immigrant communities in North Carolina,” according to its mission statement.
The credit union offers Traditional, Roth and SEP IRA plans. The account requires a minimum deposit of $25.
Alliant Credit Union IRA Savings — 0.55% APY, no minimum deposit
Although based in Illinois, it’s a simple matter for anyone in the country to join this credit union. A $5 membership (furnished by Alliant) to Foster Care to Success qualifies you for membership in the credit union and the ability to take advantage of Alliant’s personal banking products, including their IRA Savings account.
Alliant offers three different plans for its IRA savings: Traditional, Roth and SEP. You must maintain an average daily balance of at least $100 to receive the paid dividends on the last day of each month.
Ally Bank IRA Online Savings Account — 0.50% APY, no minimum deposit
Ally may be an online-only bank, but its history stretches back to the beginning of the 20th century as a financial institution that helped automaker General Motors finance sales. In its current iteration, Ally offers a wide range of competitive savings products, including an IRA account that earns the listed APY. Ally offers three different types of plans: Traditional, Roth and SEP, covering a variety of retirement needs while offering a high rate of return.
State Department Federal Credit Union IRA Savings — 0.50% APY, no minimum deposit
State Department Federal Credit Union offers Traditional and Roth IRA Share options for their members through their IRA Service Center. You can open an IRA online (you’ll still need to print and mail the forms once completed) or request an IRA Kit by mail. You’ll also need to maintain a regular savings account with the credit union. Employees and contractors of the State Department are eligible to join, as are their family members. The credit union also partners with other organizations, but the simplest way to become a member is by joining the American Consumer Council.
Lafayette Federal Credit Union IRA Savings — 0.50% APY, $50 minimum deposit
Lafayette has a range of IRAs — Traditional, Roth, SEP and CESA — as CDs and savings accounts, with both fixed and variable rates. This IRA Savings account has a variable rate and a $50 minimum opening deposit.
Becoming a member is as easy as joining the Home Ownership Financial Literacy Council. The $10 membership fee qualifies you to then join Lafayette.
Cadets Federal Credit Union — 0.50% APY, $1,000 minimum deposit
To take advantage of this IRA rate at Cadets, you’ll also need to open and maintain a regular savings account with them with at least $25 — and if you want to earn interest on that account, you’ll need to bump up that minimum to $250. You’ll need $1,000 to earn the IRA rate.
Based in Buffalo, New York, Cadets was established in 1950. It’s easy to become a member of the credit union by joining the Polish Cadets of Buffalo for $40. Once you’re a member of Cadets FCU, you’re always a member.
What’s the benefit of an IRA savings account?
Like any IRA account, an IRA savings account provides tax advantages to the saver. The exact benefits depend on the IRA plan or type you choose. While the two most common types of IRA offered are Traditional and Roth, more specialized versions of the account are also available, including:
- Simplified Employee Pension (SEP): A type of IRA that can be used by either small business owners on behalf of their employees, or by self-employed individuals, the SEP IRA functions similar to a Traditional IRA — except it has a much higher annual contribution limit. You can contribute 25% of your annual compensation to the plan or $57,000 (whichever is the lesser), and like a Traditional IRA, those contributions are tax-deductible.
- Savings Incentive Match Plan for Employees (SIMPLE): Another IRA tailored for small-business owners or those who are self-employed, SIMPLE plans allow you to put up to $13,500 of your business net earnings into the account, where the money remains tax-deferred until you start taking your withdrawals.
- Coverdell Education Savings Account (CESA): This account aids with saving for education costs for those 18 years old or younger, but functions similar to a Roth IRA with more limits. For example, the beneficiary must be 18 years or younger when the account is set up (or be a special needs beneficiary), and you can make a maximum contribution of $2,000 per year. Only those with modified adjusted gross incomes of up to $110,000 ($220,000 if filing a joint return) may make a contribution to the account, and the contributions are not tax-deductible. The beneficiary can use the funds from the CESA for qualifying expenses toward their education.
How does an IRA savings account work?
You can contribute money to your IRA savings account anytime, just as you would with an ordinary savings account. However, because this is an IRA product, it’s still subject to a 2022 contribution limit of $6,000 (or $7,000 if you’re age 50 or older), the same as an IRA account at a brokerage firm.
In that same vein, the penalties for withdrawing money early from your IRA remain in effect for the IRA savings account. Taking money from your Traditional IRA savings account incurs a 10% penalty if you’re younger than 59 1/2 years old (and assuming you don’t qualify for one of the special circumstances allowing a penalty-free withdrawal, such as a first-time home purchase).