Roth IRA CD's

[Guest Rick2542]

Hi everyone. I'll admit it, I'm in the dark, but you have to start somewhere and would appreciate any advice offered. I want to start a Roth IRA, using ONLY guaranteed investments like FDIC insured CD's, or similar. I am absolutely NOT interested in mutual funds, etc. I have only about 12 years to go and I want to play it safe and then some. CD's interest me because they pay an interest rate I can live with, currently 4.5 % or better. My question is can these accounts be used in an IRA, and where can I get info on them? I just seem to be going around in circles sending emails that don't get replied to. I would also consider other safe investments like Treasury Bonds, but I could use some advice to get started. Thanks Rick

[himt4]

Given that you have correctly determined that you are eligible to contribute a roth IRA, I will answer your question:

YES, you can open a Roth IRA CD. Just walk into (or call) your bank, and tell them you want to open a ROTH IRA account and you want the account invested in a CD.

[John G]

Good question. Sure you can do a CD... at a bank. You can also invest in bonds directly or mutual funds that are dedicated to bonds. Some bonds are backed by the federal government or the local taxing authorities. Other are "revenue" or corporate bonds and have more risk.

But, are you dying in 12 years or just retiring in 12 years? Lots of folks live 2+ decades after they retire, so you may need to consider the erosion of your annual draw. Twelve plus 20 years is a long time.

Second question, do you have other income like a pension to go with social security? And if yes, what fraction of your future income is likely to be coming from the IRA assets. If you have a good base, then you won't be drawing down as heavily on your IRA assets and could invest them (in many ways) for a higher yield.

Risk free equates to lowest annual return. There are many ways to reduce or manage risk and get a better long term result.