FAQ

1 What is a Certificate of Deposit?

A certificate of deposit (CD) is a deposit account that pays out interest on funds that customers commit for a specific period of time. Customers agree to not withdraw their money for the duration of the CD term. Customers who opt for longer CD terms or larger CD deposits tend to earn higher CD rates. Upon CD maturity, customers receive their principal and interest earnings altogether. If the customer wants to withdraw their money before CD maturity, the bank may impose an early withdrawal fee, which may end up reducing interest earnings and/or principal.

2 What is the difference between a CD and an IRA CD?

Essentially, an IRA CD is a CD that is held in a tax-sheltered account. Meanwhile, the interest earnings with a regular CD are subject to interest income taxes.

When opening an IRA CD, you usually have to designate what type of IRA (traditional or Roth) you plan to open for your CD. In a traditional IRA (contributions are tax-deductible), your interest earnings will be taxed when you take distributions from the IRA. In a Roth IRA (contributions are not tax-deductible), your interest earnings are tax free.

3 What happens when an IRA CD reaches maturity?

When an IRA CD matures, you may have the option to renew it and earn the current market rate. If you don’t renew the IRA CD or open another IRA CD, you may keep the funds in the IRA if the IRA was opened through a financial institution that offers other types of investments.

Otherwise, you’ll have to either perform an IRA transfer or rollover to another financial institution. An IRA transfer means that you move funds from one brokerage to a new brokerage. An IRA rollover means that you move funds from one IRA to an existing IRA.

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disqus_7CrHwiQtgt
Sunday, 25 Mar 2018 10:54 PM
<p>I did last year! (1) U just open another IRA account within 60 days, tell new accounts information or fill out forms.</p><p>(2) if u choose direct deposit to ur account, one time withheld 20% tax, but u can add that withheld from ur pocket and rollover to another financial institution within 60days.</p>
MyBankTracker
Tuesday, 13 Mar 2018 3:54 PM
<p>Jennifer, because you're moving the funds in one IRA to another IRA, you have two options:</p><p>1) A direct rollover. This is means the funds are moved between the IRAs. You may be able to perform the transfer through the IRA's online platform or with the assistance of an agent.</p><p>2) A 60-day rollover. For this method, the funds in your IRA are distributed to you in the form of a check. This check MUST be deposited into the new IRA within 60 days or you may be hit with penalties and taxes.</p>
Friday, 16 Feb 2018 6:54 PM
<p>I would like to roll over my IRA to another financial institution, what do I need to do</p>