Updated: Feb 12, 2024

Can You Transfer an IRA CD to Another Bank?

Learn about the rules that apply when you transfer an IRA CD another bank. Find out if there are any fees and penalties involved and how you can transfer retirement savings smoothly without any trouble, including paying taxes and withdrawal penalties.
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Yes, it is possible to transfer an IRA CD to another bank, but not without withdrawing the money from the IRA CD. That means that you might be liable for early withdrawal penalties if the CD hasn't reached maturity.

Transferring an IRA from one financial company to another is complicated. Adding the fact that the IRA holds a CD just complicates matters. This article will discuss the ins and outs of the IRA CD transfer process.

How IRA CDs Work

An IRA CD works a lot like a regular CD. In fact, the only difference is that the CD account is opened inside your Individual Retirement Account (IRA). That means that the CD gets all of the tax benefits and is subject to all the same restrictions as an IRA.

You are permitted to contribute up to $6,500 per year (as of 2023) to an IRA. Even if you have the extra cash, you cannot contribute more. That means that unless you already have money in your IRA, you cannot open a CD in an IRA with more than $6,500.

Traditional IRA Vs. Roth IRA

Traditional IRA Roth IRA
Contributions may be tax-deductible. Contributions are not tax-deductible.
Pay taxes upon withdrawal. Earnings can be withdrawn tax-free and without penalties if the funds were in the Roth IRA for 5 years and you've reached age 59 1/2.
You must be under age 70 1/2 to contribute. You can contribute at any age.
Required minimum distributions (RMDs) are required starting at age 70 1/2. No RMDs required.

Once you open the CD inside your IRA, it functions just like any other CD. Your money will be safe and will earn some interest. Over time, the CDs balance will grow.

You can choose any term for your IRA CD. Which term you choose will affect how much interest you’ll earn over the life of the CD. It will also affect the timing of when you can move your IRA CD to another institution.

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Rules on IRA Transfers

Because IRAs are intended to help people save for retirement, there are rules regarding withdrawing and moving the money in an IRA. That can make transferring an IRA a difficult process. It’s incredibly important that you do it properly because you could incur some significant tax penalties if you make a mistake.

Wait until maturity

The first thing that you should do when planning to transfer an IRA CD to another bank is wait for the CD to mature.

When a CD matures, you are free to make changes, like adding money to the CD changing its term or moving the money to another account.

If you don’t wait for the CD in your IRA to mature, you may have to pay early withdrawal fees to break the terms of the CD.

Usually, the early withdrawal penalty for a CD is a specific number of months of interest. The longer the CD’s term, the higher the fee will be.

If you withdraw your money from the CD shortly after opening it, it’s even possible to withdraw less than you put into the CD. That’s why it’s important to let the CD mature before doing anything.

Transfers are time-sensitive

Once the CD has matured, you can begin the process of transferring your IRA. There are a few different time limits in play at this point.

The more pressing one is the original bank’s time limit for making changes to the CD. Once the CD matures, you should immediately let your bank know that you do not want to renew the CD.

If you don’t do this, your bank will automatically roll the funds into a new CD with the same term. If you don’t decline the renewal within a few days of the CD’s maturity, you’ll be on the hook for early withdrawal penalties.

Once you’ve done that, the money from your IRA CD will be moved to an IRA savings account. You’ll then be able to move it to a new bank.

Once you start the process of moving your IRA from one bank to another, the second timer starts. You have 60 days to move the funds from one IRA to another.

If you take longer than that sixty days, it will be treated as a distribution from the IRA rather than a transfer. You’ll then have to deal with the tax consequences.

When transfers take longer

So, what happens if a transfer doesn’t go smoothly? In the worst case, you’ll have to treat the transfer as a distribution from the IRA. That means you can’t put the money into an IRA CD at your new bank.

Worse still, you’ll have to pay income taxes, plus a 10% penalty on the balance of the CD.

Thankfully, if you do what you’re supposed to do in a timely manner, this scenario is very uncommon. Banks don’t often take 60 days to transfer money, so it’s on you to fill out the requisite paperwork to avoid the penalty.

If you do hit some hiccups, but avoid breaking the sixty-day limit, there aren’t any significant consequences. The biggest consequence will be some lost earnings while your IRA’s balance isn’t in a CD earning interest.

How to Transfer an IRA CD

The first thing to do when you want to transfer is to make sure your old bank doesn’t automatically renew your CD.

Once you’ve made sure that won’t happen, the best thing to do is to contact your new bank. Ask for help transferring the IRA CD from your old bank. Your new bank will be eager to help because it wants to make sure it secures your business.

Your new bank will send you the paperwork you need to fill out. It might also contact your old bank on your behalf.

If they don’t contact your old bank and let it know that you’re planning to transfer the IRA and ask for the required paperwork.

Make sure you fill out any paperwork you receive as soon as it arrives to make sure the process is quick and smooth.

All-in-all, the process is relatively easy if you listen to what both banks say you need to do. In the end, the process should take no longer than a month.

In the best case, you’ll never see the money yourself, it will just move from one bank to the other.

In other cases, your old bank will mail you a check to forward to your new bank. If this happens, make sure you fill out the proper tax forms when you file your taxes for the year.

Best IRA CDs

If you want to open an IRA CD or want to transfer an existing CD to a new one, consider these options.

Synchrony Bank 5-Year IRA CD

Synchrony Bank offers IRA CDs with a wide variety of terms. The longer the term of the CD, the higher the interest rate will be.

Because IRAs are intended for retirement savings, the longest term, with the highest rate, tends to be the best choice, so we recommend the 5-year IRA CD.

Synchrony Bank offers both traditional and Roth IRA CDs, so you can take advantage of either type of account at the bank. As a bonus, there’s no monthly fees or minimum deposit requirements to worry about.

Ally Bank 5-Year High Yield IRA CD

Ally Bank offers CDs with terms ranging from three months to five years. The five-year CD pays the best interest rate, so that is the one we recommend.

Like Synchrony Bank, Ally offers both traditional and Roth IRAs. Small business owners can also take advantage of the SEP IRA option at Ally.

One benefits of Ally’s CDs is that there is no minimum balance requirement to open one.

However, Ally will pay a better rate for higher balances. You’ll earn the lowest available rate on CDs opened with a balance of less than $5,000.

If your opening deposit exceeds $5,000, you’ll earn the middle interest rate. If your opening deposit exceeds $25,000, you’ll earn the best available rate.

Note that the rate you earn is based on the balance when you open the CD. You can’t graduate to a higher rate thanks to the interest your CD earns.

TIAA Bank 5-Year IRA Yield Pledge CD

TIAA Bank offers IRA CDs to customers who are able to meet a $5,000 minimum deposit. In exchange for that high minimum balance, you get a number of benefits.

The first is the fact that there are no monthly fees for holding an TIAA Bank IRA CD. Your account’s balance is left to grow without fees eating at the earnings.

The second benefit is TIAA Bank ’s yield pledge. TIAA Bank promises to always be in the top 5% of interest rates offered by other banks for equivalent products. That means you can feel confident that you’re earning the best rate possible.

Finally, TIAA Bank offers complimentary twenty-day maturity alerts. Twenty days before your CD matures, TIAA Bank will notify you. That gives you plenty of time to make plans for what to do when your CD does mature, whether you want to roll the balance into a new CD or transfer it to a different bank.