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CD Purchase from Tax Deferred IRA?
Old 09-23-2022, 06:39 PM   #1
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CD Purchase from Tax Deferred IRA?

Question -- My portfolio is all in a tax-deferred IRA from a former 401k account...... With the market going down and I have some funds in a cash account (Tax-deferred)..... Through Fidelity I can purchase CDs on-line..... I was thinking of purchasing 200k from the cash account 3 months..... Let's say the CD Shows 4.0 for the 3 month CD.... Does this mean my account will get the 200K + 4% back to the cash account...... Is all of this still tax-deferred if I am not taking the funds out??

Thoughts on short term CDs right now??
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Old 09-23-2022, 07:02 PM   #2
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Just like buying/selling equities in an IRA... No tax due until you make withdrawals from the IRA. If you buy a 3 month 200k CD in your IRA, at the end of the 3 months you get the 200k back into your IRA account plus the interest. Just keep all the buying/selling in the IRA.

Personally, I think short term CD's are a good way to go "at this time", if you have spare cash sitting in an account... (Tax paid or IRA) I'm laddering 3 to 18mo CD's now. As they mature, I'll reinvest at the current (hopefully higher) rates.

Above is my opinion and YMMV.
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Old 09-24-2022, 12:16 AM   #3
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Originally Posted by LakeRat1 View Post
Question -- My portfolio is all in a tax-deferred IRA from a former 401k account...... With the market going down and I have some funds in a cash account (Tax-deferred)..... Through Fidelity I can purchase CDs on-line..... I was thinking of purchasing 200k from the cash account 3 months..... Let's say the CD Shows 4.0 for the 3 month CD.... Does this mean my account will get the 200K + 4% back to the cash account...... Is all of this still tax-deferred if I am not taking the funds out??



Thoughts on short term CDs right now??


Not sure I follow but 4% is an annual rate so your interest on a 3 month CD for 200k is (200k*.04)/4= 2K. At the end of 4 months you get your principal of 200k + 2k in interest. It would all be tax deferred.
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Old 09-24-2022, 12:57 AM   #4
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Not sure I follow but 4% is an annual rate so your interest on a 3 month CD for 200k is (200k*.04)/4= 2K. At the end of 4 months you get your principal of 200k + 2k in interest. It would all be tax deferred.

I am really confused now, so a 3 month CD that is being advertised at 4%.... Will pay how much in interest at the end of the 3 months? 200K x .04 = $8000 in interest is not correct
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Old 09-24-2022, 05:24 AM   #5
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I am really confused now, so a 3 month CD that is being advertised at 4%.... Will pay how much in interest at the end of the 3 months? 200K x .04 = $8000 in interest is not correct
4% is the APY (annual percentage yield). You aren't holding it for a year, 3 months is 1/4 of the year.
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Old 09-24-2022, 06:19 AM   #6
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I am really confused now, so a 3 month CD that is being advertised at 4%.... Will pay how much in interest at the end of the 3 months? 200K x .04 = $8000 in interest is not correct
It's early in the morning but without using a calculator and with no compounding it would be $2,000.
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Old 09-24-2022, 06:58 AM   #7
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I guess it could be credited and compounded monthly like my credit union CDs. On those CDs you get one month of interest at the end of the month added to the CD. Since 4% is annual rate, monthly you get 1/12 or .0033333. So you start with 200,000 then
end of month 1, 200,667
end of month 2, 201,336
end of month 3, 202,007


This is if compounded and computed like a regular CD
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Old 09-26-2022, 08:33 AM   #8
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I guess it could be credited and compounded monthly like my credit union CDs. On those CDs you get one month of interest at the end of the month added to the CD. Since 4% is annual rate, monthly you get 1/12 or .0033333. So you start with 200,000 then
end of month 1, 200,667
end of month 2, 201,336
end of month 3, 202,007


This is if compounded and computed like a regular CD


It could be but OP is referring to a brokered CD from Fidelity, not a credit union. Most brokered CDs pay semi-annually but a few do pay monthly. I see the 3 month CDs they have right now all pay at maturity except one that is monthly. The coupon on the monthly payer is a bit less than the others.
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Old 09-27-2022, 06:12 AM   #9
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Originally Posted by LakeRat1 View Post
Question -- My portfolio is all in a tax-deferred IRA from a former 401k account...... With the market going down and I have some funds in a cash account (Tax-deferred)..... Is all of this still tax-deferred if I am not taking the funds out??

Thoughts on short term CDs right now??
To answer your question, yes. I use my Fido IRA CDs as kind of a three year emergency fund and just roll them back over when they mature.
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