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IRA CD Lockup for Retirees
Old 09-21-2019, 09:44 AM   #1
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IRA CD Lockup for Retirees

I'm already retired and am considering placing a substantial amount of money, at least for me, in an IRA CD at a bank. I was wondering how many retirees use bank IRA CD's as an investment vehicle? If you do, how long do you lock your money up, at what rate, and do you worry about accessing the money if you need to?

Awaiting your replies. Thanks!
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Old 09-21-2019, 09:48 AM   #2
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I'll be interested in reading other replies. I personally always keep my CDs in taxable accounts, to be used after maturity if cash is needed, or rolled over if not. I'm not sure what the advantage (or dis) would be for keeping them in pre-tax accounts.
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Old 09-21-2019, 10:15 AM   #3
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I'd suggest that you look into brokered CDs at Schwab or Fido. You'll have a wide range of options and reports here say that rates are often better than going direct. Also, if you need the money sooner you can sell the CD and get it, though there will be a penalty. If you are concerned about that you might consider T-bills or notes. They are much more liquid.

I have bought a few brokered CDs; I would never consider screwing around with moving money, etc. to buy direct from a bank.
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Old 09-21-2019, 10:32 AM   #4
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At many (most?) banks an IRA CD can be broken without penalty if the holder is at least age 59.5.
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Old 09-21-2019, 10:38 AM   #5
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At most banks an IRA CD can be broken without penalty if the holder is at least age 59.5.
Really? I've seen provisions to allow the RMD amount (of the CD balance) to be withdrawn without penalty for those subject to RMDs,

Could you point me toward an example of a more generous withdrawal policy for IRA CDs? I'm not doubting you, but I've not seen that.
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Old 09-21-2019, 10:38 AM   #6
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We do. We have 2 maxed out IRAs (Mine and DWs) for 5 years at 3.85%. They will Mature when I am 70 and DW is 65 respectively. we will then draw down on them. We also have equal or more post tax cash in 2 year CDs at ~ 3.xx%. We do not draw down from our IRAs, we use the post tax stash to liv on as needed.
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Old 09-21-2019, 10:41 AM   #7
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Could you point me toward an example of a more generous withdrawal policy for IRA CDs? I'm not doubting you, but I've not seen that.
Last I checked it was true at PNC Bank, for one.
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Old 09-21-2019, 11:06 AM   #8
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...Could you point me toward an example of a more generous withdrawal policy for IRA CDs? I'm not doubting you, but I've not seen that.
GTE Financial has this policy for their IRA CDs, once a year access to "20% of the current balance if you are over 59Ĺ years old, with no interest penalty". Unfortunately, their rates have really dropped.
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Old 09-21-2019, 11:14 AM   #9
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IRA Cd's. Early withdrawal penalty, If you close CD early.

59 1/2, you can withdrawal money from IRA CD, no EWP, (some banks/credit unions).

RMD, also, no EWP. But your IRA withdrawals are taxable income.

Been doing IRA CD's, for many, many, years. Prefer them over brokered IRA CD's.


BE careful. EWP, terms are all different. Some are really BAD. Need to read the fine print.
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Old 09-21-2019, 11:23 AM   #10
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IRA Cd's. Early withdrawal penalty, If you close CD early.

59 1/2, you can withdrawal money from IRA CD, no EWP, (some banks/credit unions).

RMD, also, no EWP. But your IRA withdrawals are taxable income.

Been doing IRA CD's, for many, many, years. Prefer them over brokered IRA CD's.


BE careful. EWP, terms are all different. Some are really BAD. Need to read the fine print.
Wolf,

Thanks for the reply. Just curious, which banks do you use?
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Old 09-21-2019, 11:57 AM   #11
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I second what OldShooter said. Lots more flexibility with a brokerage account.
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Old 09-21-2019, 11:58 AM   #12
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Originally Posted by PERSonalTime View Post
I'm already retired and am considering placing a substantial amount of money, at least for me, in an IRA CD at a bank. I was wondering how many retirees use bank IRA CD's as an investment vehicle? If you do, how long do you lock your money up, at what rate, and do you worry about accessing the money if you need to?

Awaiting your replies. Thanks!
When I was laid off I rolled all my ex employer retirement money into Traditional IRA CDs at a few different banks. That was last year when interest rates were rising and the market was a little to volatile for me. I was able to lock up quite a bit at 4.02% for 5 years, of course that deal is long gone. I have at least one taxable CD maturing every year that takes care my yearly expenses. All of my CDs, Traditional and Roth IRA and regular taxable CD's are making at least 3% minimum, both long and short term and I know exactly how much interest I'm earning every month and it's far more than I need to live on. I could probably make more in the market but this way I'm not risking my principal and I can sleep at night. I'm also able to control my income to qualify for the ACA subsidy and make Roth conversions to reduce my future tax liabilities. I have to admit all this negative interest talk and lowering of rates is a little concerning but I'll have to deal with it if or when it happens. I never worry about accessing my money, if I needed it early I could pull what I need and pay the penalty, I think it ranges from 90 days on short term CD's to 365 days for 5 year CDs on the amount withdrawn. Check out Navy Federal if you can qualify, they still have a couple of decent rates, not as great as they were last year though. Consider building a CD ladder with multiple smaller CDs so you have access to "x" amount of funds every year or 6 months so early withdrawals are not a concern. Here is a very informative website that I use.

https://www.depositaccounts.com/cd/
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Old 09-21-2019, 12:47 PM   #13
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When I was laid off I rolled all my ex employer retirement money into Traditional IRA CDs at a few different banks. That was last year when interest rates were rising and the market was a little to volatile for me. I was able to lock up quite a bit at 4.02% for 5 years, of course that deal is long gone. I have at least one taxable CD maturing every year that takes care my yearly expenses. All of my CDs, Traditional and Roth IRA and regular taxable CD's are making at least 3% minimum, both long and short term and I know exactly how much interest I'm earning every month and it's far more than I need to live on. I could probably make more in the market but this way I'm not risking my principal and I can sleep at night. I'm also able to control my income to qualify for the ACA subsidy and make Roth conversions to reduce my future tax liabilities. I have to admit all this negative interest talk and lowering of rates is a little concerning but I'll have to deal with it if or when it happens. I never worry about accessing my money, if I needed it early I could pull what I need and pay the penalty, I think it ranges from 90 days on short term CD's to 365 days for 5 year CDs on the amount withdrawn. Check out Navy Federal if you can qualify, they still have a couple of decent rates, not as great as they were last year though. Consider building a CD ladder with multiple smaller CDs so you have access to "x" amount of funds every year or 6 months so early withdrawals are not a concern. Here is a very informative website that I use.

https://www.depositaccounts.com/cd/


RetiredandLovingIt,

Thanks for your comprehensive response. Iíll check out your information.
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Old 09-24-2019, 02:38 PM   #14
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I second what OldShooter said. Lots more flexibility with a brokerage account.
Curious. How do you take RMD, from brokered CD? Or if you are 59 1/2, and want to take a some $ out of your broker IRA CD, how do you do it?
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Old 09-24-2019, 02:39 PM   #15
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Wolf,

Thanks for the reply. Just curious, which banks do you use?
I use https://www.depositaccounts.com, search for best bank/credit union,
CD's nationwide.
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Old 09-24-2019, 02:50 PM   #16
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Curious. How do you take RMD, from brokered CD? Or if you are 59 1/2, and want to take a some $ out of your broker IRA CD, how do you do it?
I don't know what you mean by a broker IRA CD. I've never bought CDs from a bank, only through my brokerage account. I'm not RMD age yet. My guess is that it would work much like taking any RMD from an IRA at a brokerage. You could sell the CD, then take the RMD from your core settlement fund. Maybe you could transfer the CDs in kind as part of the RMD.
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Old 09-24-2019, 04:02 PM   #17
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Have about 10% of the portfolio in IRA CD's at GTE at 3.30% for 5 years with the ability to add as we wish.
Also have some CD's in taxable for flexibility in managing ACA subsidies.
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Old 09-24-2019, 04:09 PM   #18
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Curious. How do you take RMD, from brokered CD? Or if you are 59 1/2, and want to take a some $ out of your broker IRA CD, how do you do it?
If your IRA is 100% CDs I suppose you might have to sell one. But IMO that would be poor planning. Just arrange things so that at least the RMD amount is available every year in a MMF or, sometimes better, in t-bills that mature at a convenient time. That's an advantage of having your money in a brokerage account. You aren't limited to CDs. They are just one of the options. We keep a year or two of cash needs in SWVXX.
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Old 09-24-2019, 04:16 PM   #19
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If your IRA is 100% CDs I suppose you might have to sell one. But IMO that would be poor planning. Just arrange things so that at least the RMD amount is available every year in a MMF or, sometimes better, in t-bills that mature at a convenient time. That's an advantage of having your money in a brokerage account. You aren't limited to CDs. They are just one of the options. We keep a year or two of cash needs in SWVXX.
For my parents, I have the taxes withheld from their RMD distribution in Dec, but the monies are not in CD's.
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Old 09-24-2019, 06:42 PM   #20
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I have two types of IRA CDs:

- three brokered CDs in my VG IRA that I bought through VG. They are each an amount that is slightly more than my RMD will be in the years they mature. I got a decent but not great interest rate on them. Their main purpose is to provide sufficient funds for each year's RMD for several years if the other assets in the IRA take a big hit that year.

- a larger 40 month credit union CD paying 3.75% that I bought a few months ago to take advantage of that rate. I transferred funds from a VG bond fund to the CU. This CD can be added to up to $100K. The paper work was a bit of a hassle but now I have an IRA established at that CU and can easily transfer money in in the future if their interest rates warrant it. I would not open bank/CU IRA accounts at any more institutions as I don't want to unnecessarily complicate the portfolio for my wife if she needs to sort it out after I'm gone.

(I used "I" and "my" above but everything I said has been replicated in my wife's IRA.)
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