The biggest difference between a CD and an IRA is the length of time you plan to have the investment. CDs are a savings tool with specific term investment options. Penalties may apply if you break the term agreement of a CD. IRAs are a tax incentive savings tool for working individuals with earned income and invested until retirement. A Traditional IRA can reduce the taxable income each year a contribution is made. A Roth IRA does not reduce the taxable income; however, it can provide tax advantages at the time of withdrawal. IRAs are a tool to supplement social security income at retirement.