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Sun 16 Mar, 2008 10:11 am
This information may not be relevent to many A2Kers, but may be invaluable to their parents, or even grandparents.
Many people have Individual Retirement Accounts (IRAs) that are put into Certificates of Deposit (CDs). As you probably know, if you take any money out of the CD before it matures, there is a hefty penalty.
At 59 1/2, a person can start taking money from their IRAs. If they have one in a CD, the best thing is to wait until it matures, before taking out any of the money without a penalty from the bank.
At 70 1/2, the rules change. Uncle Sam requires that a person who has attained that age MUST take out an RMD (required minimum distribution) every year. How much they are obliged to take is based on some actuarial figure.
Now let's say that you are 70 1/2 and have a CD which is not maturing during the year that you have to take the RMD. Most banks won't penalize you for removing the RMD (but not any more than that). After all, you are required, by the government, to take that money.
But there are some who WILL penalize you. The rub is, that they will not tell you that before hand and are not required to do so. You must ask BEFORE you put your money in an IRA CD.
Interesting. The bank I use for IRA CDs (State Farm Bank) doesn't let you do a lot of fine tuning on maturity dates, either. The rule is that a CD in an IRA must have a term of at least one year. I don't know if this is a government rule, or the bank's.
I use State Farm, by the way, because their rates are always significantly better than any of our local brick & morter banks in town. They're FDIC insured.
Thanks for the links. Bankrate, I was familiar with. The one to check the strength of a bank is new to me.
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