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.
Top 10 IRA savings accounts of May 2019
Minimum balance to earn APY
Ally Bank IRA Online Savings Account (Traditional, Roth, SEP)
Self-Help Federal Credit Union IRA Account (Traditional, Roth)
Alliant Credit Union IRA Savings (Traditional, Roth, SEP)
Latino Community Credit Union IRA Share Account (Traditional, Roth, SEP)
First Internet Bank Money Market IRA (Traditional, Roth)
Bethpage Federal Credit Union IRA Money Market (Traditional, Roth)
Spectrum Credit Union MarketEdge IRA (Traditional and Roth)
Digital Federal Credit Union Money Market IRA Account (Traditional, Roth, CESA, SEP, SIMPLE)
Northpointe Bank IRA Ultimate Money Market
Wings Financial Credit Union High Yield IRA (Traditional, Roth, CESA)
Ally Bank IRA Online Savings Account— APY 2.20%, minimum deposit $0
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 an APY of 2.20%. Ally offers three different types of plans: Traditional, Roth and SEP, covering a variety of retirement needs while offering a high rate of return.
Self-Help Federal Credit Union IRA Account— APY 2.12%, minimum deposit $100
A credit union with more than 27 branches and $1 billion in assets, Self-Help’s physical locations are scattered throughout California, Wisconsin, North Carolina and Florida. However, anyone in the country can sign up to bank with them online by joining the Center for Community Self-Help, which involves paying a one-time $5 fee.
The IRA account offered by Self-Help comes with an option to choose either a Traditional or Roth plan. You’ll need to maintain a balance of at least $100 to earn the APY, but considering this is for your retirement, that shouldn’t be too tough.
Alliant Credit Union IRA Savings— APY 2.00%, minimum deposit $100
Although based in Illinois, it’s a simple matter for anyone in the country to join this credit union. A $10 donation to Foster Care to Success qualifies you for membership 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. The APY is 2.00% no matter what plan you choose so long as you maintain the account’s minimum balance of $100.
Latino Community Credit Union IRA Share Account— APY 2.02%, minimum deposit $25
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 an IRA share account — their version of a savings account — with either a Traditional, Roth or SEP plan. The account requires a minimum deposit of $25 and currently earns an APY of 2.02%.
First Internet Bank Money Market IRA— APY 2.02%, minimum deposit $100
It may not literally be the first internet bank ever, but this Indiana-based financial institution does offer a great IRA product with a wide variety of plans. Customers can choose from the standard Traditional and Roth options, as well as SEP and CESA plans.
You need to deposit a minimum of $100 to open the account and — more importantly — maintain an average daily balance of at least $4,000 to avoid paying a monthly $5 fee. However, there’s no minimum balance needed to earn the 2.02% APY on the funds placed in the IRA account.
Bethpage Federal Credit Union IRA Money Market Account— APY2.00%, minimum deposit $1
A staple of the Northeast’s credit union industry, Bethpage opens its arms to anyone in the country who wants to become a member. All it requires is for you to open a $5 savings account with Bethpage and you’re in the club, meaning you’re also able to open an IRA money market account should you choose.
Bethpage FCU offers Traditional and Roth IRA plans with the account, which requires a minimum deposit of $1 to earn the full 2.00% APY. There’s no monthly fee associated with the account.
Spectrum Credit Union MarketEdge IRA— APY 1.85%, minimum deposit $2,500
Based in California, this credit union accepts members throughout the country so long as they make a $15 donation to join the Contra Costa County Historical Society. You can also sign up to pay a $25 annual fee to the Navy League of the United States.
The IRA offered by Spectrum earns a minimal APY of 0.50% if you have a balance up to $2,500, but for balances $2,500 and up, you can expect to earn a nice rate of 1.85%. Spectrum currently offers Traditional and Roth IRA plans.
Digital Federal Credit Union Money Market IRA— APY 1.66%, minimum deposit $25,000
The name of this credit union may sound like it was frantically created by a guy in the marketing department running ten minutes late to a pitch meeting, but what it lacks in pizazz it makes up for with great rates. Before you can open a money market IRA account with this credit union, you have to become a member, a matter of making a $10 donation to Reach Out for Schools.
This money market IRA account offers Traditional and Roth plans, as well as CESA, SEP and SIMPLE. It requires a minimum balance of $1,000 to begin earning interest, and the APY works on a tiered system. The sweet spot for most savers will be the 1.66% earned on balances between $25,000 and $99,999.99. Accounts with balances $100,000 and over enjoy a 1.77% APY while those falling short of $25,000 make do with 1.56%.
Northpointe Bank IRA Ultimate Money Market— APY 1.50%, minimum deposit $25,000
This bank, headquartered in Michigan, provides an IRA money market best reserved for big savers. The bank’s Ultimate Money Market earns APY on a tiered system, and balances up to $24,999.99 only earn 0.25% APY. However, if you can break the $25,000 threshold, you’ll earn an APY of 1.50% on balances all the way up to $1,000,000 (after which your money earns 0.50%).
Wings Financial Credit Union High Yield IRA— APY 1.26%, Minimum deposit $10,000
Maybe you’ll be amazed by the competitive rates offered by this credit union with a focus on workers in the airline industry, but once you make a $5 donation to the Wings Financial Foundation, you’ll find plenty of opportunities to test the reality of the products offered to you.
The high-yield IRA savings account offered by Wings Financial Credit Union includes Traditional, Roth and CESA plans and earns an APY of 1.26% on balances from $10,000 up to $49,999.99. Balances less than $10,000 earn 0.10% while those $50,000+ earn 1.36%.
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 type of 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 $56,000 (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 $13,000 of your business net earnings into the account, where the money remains tax-deferred until your 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 any time you like, just as you would with an ordinary savings account. However, because this is an IRA product, it’s still subject a 2019 contribution amount limit of $6,000 (or $7,000 if you’re aged 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).