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What are IRA share certificates and how do they work?

An Individual Retirement Account (IRA) is a financial instrument that helps people save money for retirement by earning interest that becomes accessible to the account holder in retirement.
IRAs can be opened at traditional banks, at credit unions, and at investment companies. An IRA opened at a credit union is called an IRA share certificate.
At Credit Union of Southern California (CU SoCal), we make it easy to open an IRA share certificate.
Call 866.287.6225 today to schedule a no-obligation consultation and learn about our mortgages, home equity lines of credit, auto loans, personal loans, checking and savings accounts, and other banking products. As a full-service financial institution, we look forward to helping you with all your banking needs.

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What is an IRA?

An IRA is a type of account that helps people put away and save money for retirement
According to the IRS, contributions you make to a traditional IRA may be fully or partially tax-deductible, depending on your filing status and income.
An IRA can be opened at a credit union, bank, or through a mutual fund or life insurance company. IRA accounts are also available through stockbroker and brokerage companies.
There are two kinds of IRA accounts Traditional and Roth IRAs. Each is unique with rules and tax benefits.

What is a share certificate?

A share certificate is a type of savings account offered by credit unions. The equivalent account offered by a bank is called a certificate of deposit (CD).
Share certificates require that the funds you deposit into the account be held there for a specific term (length of time). For example, common share certificate terms can range from three months to five years. The longer the term the higher the interest rate you’ll earn.
Your credit union will be able to provide you with a list of term options and the corresponding interest rate you’ll receive.

Share certificate vs. CD: what's the difference?

As we mentioned earlier, a share certificate is the same as a CD. Similarly, and IRA share certificate and an IRA CD are the same. Certificates are offered by credit unions and CDs are offered by banks.
While the names are different, their benefits are the same. Both are low-risk accounts that earn interest at a fixed rate.
When it comes to where to deposit your money, you may be wondering, “are credit unions safer than banks?
Deposits made at banks are insured by the Federal Deposit Insurance Corporation (FDIC), and deposits made at credit unions are insured by the National Credit Union Administration (NCUA), making credit unions just as safe as traditional banks.
Credit unions and banks are federally insured people’s deposits up to $250,000.
The NCUA insures up to $250,000 to each member of the credit union. If you have more than one account in a credit union, your account’s total deposits are calculated and collectively insured up to $250,000.

How does an IRA share certificate work?

  • Before you open a retirement account, determine if you can afford to do so. You should be able to cover your monthly expenses with ease and have money set aside in a regular savings account in case emergency funds are needed.
  • Anyone with earned income can open a share certificate.
  • You may visit several credit unions to compare interest rates and terms, and determine where you’d like to open your share certificate.
  • You’ll need to complete an application, including your name, address, phone number, email address, and social security number.
  • Next you’ll choose an amount to deposit and a term (length of time) that the account will be held for. Choose carefully because once the money is deposited you cannot withdraw it without paying a penalty.
  • Make a minimum opening deposit. Your credit union will tell you the minimum requirement for the account you choose.
  • The rest is easy! Your money stays in the account for the duration of the term. When the share certificate reaches its due date you’ll receive your original money plus the interest earned.

Pros and cons of IRA share certificates

Like with all types of financial accounts there are pros and cons. The type of account you choose should be based on your age, earnings, debt, and your unique financial situation and goals. Here are some typical pros and cons to consider:


Predictable income. Interest is earned at a fixed interest rate that’s guaranteed, giving you peace of mind.
Protection from losses. IRA share certificates yield a fixed interest rate and there’s no risk of losing your money, unlike stocks and other investments that fluctuate based on economic factors.
NCUA insured. All IRA accounts are insured by the National Credit Union Administration (NCUA) for up to $250,000.
Higher earning compared to regular savings. The earned interest rates of IRA share certificates are higher than the rates provided by savings accounts.


  • Smaller return on investment. With risk comes reward and you could earn a higher interest rate and more dividends by putting your money in other types of investment accounts that yield higher interest but could result in some loss of your initial investment.
  • Contribution limits. The IRS sets annual contribution limits for IRAs. The 2023 contribution limits are $6,500 and $7,500 if you're age 50 or older.
  • Penalties. Because share certificates are lock-in for a specific length of time, if you need to withdraw your money before the certificate due date you’ll pay a penalty fee.

How to open an IRA share certificate

Each financial institution has its own unique rules and requirements for opening an account. Credit unions, including CU SoCal will require that you become a member by opening a checking account.
To open an IRA share certificate you will be asked to complete an application and provide basic identification including name, address, phone number, and proof of identification (such as a driver license).
Once you are approved you can fund your account.

Are IRA share certificates worth it?

Saving for retirement is always a smart idea. Before choosing any long-term savings account we suggest you speak with a tax professional and a financial advisor. Some types of retirement accounts are opened with pre-tax dollars while others are opened with after-tax dollars. Which you choose may affect your current taxable income and future taxes you pay.Why savvy consumers choose CU SoCal

For over 60 years CU SoCal has been providing financial services, including mortgages, Home Equity Loans, HELOCs, car loans, personal loans, credit cards, and other banking products, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County.
Please give us a call today at 866.287.6225 today to schedule a no-obligation loan consultation with a CU SoCal Member Services specialist.

Get Started on Your IRA Today!

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