I have enough money to contribute to my 2019 IRA now or I can put that in 5 year 3.55% CD and contribute to IRA at the end of the year. I'm trying to figure out which would be the best option. What would you guys do?
An IRA is just a 'bucket' where you can put different investments. You can hold CDs within your IRA.
Why do you want to hold money in a CD now but transfer to a different asset later?
Did I say that? I want to put it either in CD (not IRA CD) or my IRA and invest it in VTSAX. If I put it CD In 5 years I have access to that money and it earned 3.55% interest. In IRA I don't have access to it in 5 years (sure I know of backdoor Roth IRA) and I can only contribute $6000. If I put the money in CD now I won't contribute any $ to IRA until the end of the year or even later in 2020 for 2019. If I contribute to IRA now, it's not guaranteed that I will get 3.55% interest rate on CD at the end of the year. So, in a long run what's more beneficial in a the next 10 years, let's say?
It's not clear to me whether you said that or not - I just want to make sure you are understanding things here. You can invest in CDs
within your IRA. Or VTSAX. Or REITs. Or foreign currencies. Or Gold. Or bonds. Or whatever. And you can switch back and forth as you see fit. So it's not an 'either/or' proposition.
You *can* contribute to your IRA now and be guaranteed to get that 3.55% interest rate.... by buying a CD! As for not buying "an IRA CD" (which is a confusing term - one has an IRA *account* with various investments within that account) - if I understand you correctly the risk you run is not using the 2019 head space should you not contribute before 4/2020. With only rare exceptions you never want to miss the opportunity to max out your IRA each year. If you are wondering whether to buy in your taxable accounts now and save your tax-deferred (i.e. IRA) accounts until later, or vice versa the answer is almost always invest in your tax-deferred accounts first.
Asking what will work out better in the next 10 years no one can say for certain. CDs are (by design) going to give you just a percent or so above what they expect inflation to be going forward. The SP500 beats inflation over 10 year periods about 95% of the time, and with average returns of just under 8% after inflation. It's possible VTSAX not beat a CD with a 3.55% yield over 10 years, but not terribly likely.
Finally you've said nothing about your tax burden. The reason to invest in an IRA is to defer taxes now and to have tax-free growth until you withdraw those funds in the future. Depending on your income that can be very advantageous or only slightly advantageous.