Using an individual retirement account lets you stash away a nest egg and gives you the flexibility to pick your investments. If you're particularly risk-averse, a certificate of deposit offers a fixed rate of return that, while smaller than you might get with mutual funds or stocks, is guaranteed and can't lose money. Both the Internal Revenue Service and your bank have limits on how you can add money to your existing IRA CDs.
Regardless of what your bank allows, Uncle Sam puts his foot down on the amount of money you can add to your IRA, including money in the account invested in CDs, each year. As of 2013, you're limited to contributing no more than $5,500 per year. That limit may be less, if the amount of compensation you received for the year was less than $5,500.
Once you've opened an IRA in a CD, banks typicallly prohibit you from adding additional money to it until it matures. For example, if you put your money in a five-year CD, when you make your IRA contribution the following year, you can't add it to the existing CD. However, you could just purchase another CD in the same IRA because there's no limit to the number of CDs you can hold at a time.
Not being able to add money to your existing CD isn't always a bad thing because it forces you to ladder your CDs. Laddering allows you to even out the ebbs and flows of interest rates. For example, if you lock in all your money at today's rate and rates go up, you're stuck with the lower rate. If you have CDs that mature annually, a portion of your money locks in the new rates so you can average out your interest rates.
According to the Securities and Exchange Commission, many banks offer CDs with a maximum five-year term. So, even though retirement might be decades away, you're stuck with no more than a five-year term. However, when a CD matures and you roll it into a new CD, you can add money at that time because it's essentially a new CD. For example, say that the fifth year rolls around and your $5,500 CD has grown to $5,700. When you roll that $5,700 into a new CD, you can add your annual IRA contribution to that same CD so you have a larger balance and get a potentially higher interest rate.