Daily Dupaco

Thursday, February 18, 2016

Knock knock: IRA certificates open an extra door for retirement savings

When it comes to building that nest egg, savers have several tools at their disposal.

A sometimes-overlooked retirement investment strategy is utilizing a Term Share Certificate Individual Retirement Account, the credit union’s version of the Certificate of Deposit.

At Dupaco, members can choose a certificate term, from 18 to 60 months, and earn a fixed rate of return during that time. Interest adds into the account every six months, so members also earn interest on that additional amount, reaping the benefits of compounding interest.


The credit union’s regular IRA certificates have a $1,000 minimum investment requirement, while its current specials ̶ a 60-month term and a 25-month term ̶ require a $5,000 minimum investment.

“It can be a good investment option for someone close to retirement or anyone who has a low risk tolerance,” says Lynn Schmitt, Lead IRA Specialist at Dupaco. “Generally, though, the market will yield a larger rate of return over time, so it’s important for members to speak with one of Dupaco’s financial advisors to ensure they are investing their retirement funds in the most appropriate way.”

Is a Term Share IRA Certificate a Good Fit for Me?

Lynn Schmitt, Lead IRA SpecialistSchmitt says retirement savers might consider adding IRA certificates to their portfolio when they:

  • Have a larger balance they want to invest on a one-time basis.
  • Are looking for a higher interest rate than an IRA savings account.
  • Want a guaranteed rate of return, as opposed to a variable rate or investing in the market, where they could lose principal.
  • Want the funds to be insured. At Dupaco, IRAs are insured separately by the NCUA up to $250,000.

Things to Consider Before Using IRA Certificates

Before utilizing IRA certificates, it’s important to understand how they work:

  • At the end of the CD term, members have a 10-day grace period to change their IRA investments. Otherwise, the IRA certificate will automatically renew at the rate in effect at that time. 
  • Retirement age is 59 ½, so taking funds out of an IRA before then could result in IRS penalties as well as tax consequences. 
  • Dupaco allows members age 59 ½ or older to withdraw 20 percent of their IRA certificate balances each year penalty-free.
  • Dupaco charges a 12-month loss of interest if funds are taken out before the certificate maturity date. 

“At one point or another, IRA CDs will come into play for most people saving for retirement,” Schmitt says. “As rates increase over the next several years, I would expect a shift of retirement funds being moved back into IRA CDs.”

By Emily Kittle

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