How To Move An IRA To A CD
In recent years, the worldwide financial instability and disturbing rise in unemployment has been inspiring Americans to begin investigating how to move an IRA to a CD. CDs are generally considered one of the safest investments around, and taking steps to move an IRA to a CD may keep your investment safe in an otherwise turbulent market. Before you move an IRA, here's what you need to know.
Find the best CD rates. It's easier than ever to find the best available rates on CDs. With most banks maintaining an online presence, getting all the information you need is a snap. When you find the CD that offers you the best rate, you'll need to purchase it in the name of an IRA. This is the first step that must be taken to move an IRA to a CD. If you are planning to purchase a taxable CD with the proceeds of your current IRA, be sure to look into what taxes will be applied to this sort of transaction.
Get all the paperwork in order.
You may be planning to move funds from one IRA to another before deciding to move an IRA to a CD. If you are going this route, you'll need to fill out the application and transfer forms. The custodian of your new IRA will contact the administrator of your current IRA, and the funds will then be transferred. If you're not relocating funds to a new IRA, you can simply use cash already in the existing fund, or you can sell current holdings.
Wait for the funds to be transferred.
The process of transferring the funds can take anywhere from ten days to several weeks, so be patient during this part of the process. If your previous IRA is already in cash, it will be much faster to move an IRA to a CD. If your assets must be liquidated before you're able to move an IRA, the process will be slowed down a bit.
Purchase your new CD.
Once your money arrives, you're all set to purchase the CD that you chose earlier. The custodian of your new account may do this for you automatically, making it extremely easy to move an IRA to a CD. Even if your custodian does not handle this part of the process, it merely involves signing a few papers to complete the transaction.
- Be aware of penalties. Even before you choose to move an IRA, you may want to check on how costly the fees and penalties are. There's no fee for liquidating your old IRA in order to move an IRA to a CD, but IRAs commonly come with penalties for early withdrawal for liquidating the investment contained within. In most cases, these fees and penalties should not be prohibitive.
Deal with the interest.
After you move an IRA to a CD, you'll need to decide what you'd like to do with the interest the CD earns. You can either have it paid to you in distributions, or automatically reinvested. Once you move an IRA, you may be required to take distributions. However, if it is allowable and you're not in need of the income, it's a much wiser move to reinvest the interest.
Taking the necessary steps to move an IRA to a CD is not a difficult process, but it can seem overwhelming if you haven't investigated or done your research. If you have a financial advisor or trusted banking professional, consult with him before deciding to move an IRA, in order to be certain it's the wisest and most profitable decision for you.