Have you ever wondered why financial planners say employer-sponsored plans and Individual Retirement Accounts (IRAs) — such as Discover’s IRA Certificates of Deposit (CDs) — should be the first priority for people saving for retirement? Let’s look at the key reasons why:


  • Tax deferral. Your employer-sponsored plan lets you defer tax on part of your pay by contributing that amount to your plan account. With tax deferral, you don’t pay taxes on that income or earnings in your account until you withdraw the money1. In addition, because your pretax contribution is deducted directly from your pay, your taxable income is reduced. It’s important to contribute as much as you can afford to your plan.
  • Tax-deferred compounding. Compounding is what happens when previous earnings from an investment remain invested and, in turn, earn more money. Because taxes aren’t subtracted from earnings in a tax-deferred account, the effect of compounding can be even greater.
  • Matching contributions. If your employer matches part or all of your contributions, this extra money also compounds tax-free until you withdraw it.

Other Tax-Deferred Ways to Save for Retirement

  • Individual Retirement Accounts are also on top of any planner’s priority list. Like employer-sponsored plans, Traditional IRAs allow investment earnings to compound on a tax-deferred basis. Roth IRAs, on the other hand, allow earnings to compound on a tax-free basis, as long as you make qualified withdrawals. With a Discover IRA CD, you have the choice of opening either type of account, based on your particular needs.
  • An annuity, which is basically a contract between you and an insurance company, provides tax deferral as well as unlimited contributions2. A financial advisor can give you more information about the costs, limitations, and types of annuities.

You may also consider supplementing your tax-deferred retirement assets with savings and investments in taxable investment accounts. With that in mind, consider the benefits of Discover Money Market Accounts, which give you the best of both worlds: high yields with flexible access to your savings. After all, the more you set aside today, the better your financial future is likely to be


In addition to offering IRA CDs and Money Market Accounts, Discover also offers an Online Savings Account to help you with your short-term savings goals and a full range of CDs to help you save for the future. Open an account online in minutes or call our 24-hour U.S.-based Customer Service at 1-800-347-7000.

The article and information provided herein are for informational purposes only and are not intended as a substitute for professional advice.

1Withdrawals are subject to ordinary income tax. Withdrawals made prior to age 59½ may be subject to a 10% federal penalty.

2Annuities generally have withdrawal charges. In addition, earnings withdrawn before age 59½ may be subject to a 10% federal penalty.

Discover Bank, Member FDIC

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