Q: How long do I have to roll an IRA CD over from one institution to another?
A: You have a 60-day period from when you receive an IRA distribution to roll it over into another IRA. It is very important to adhere to this time frame, because if you do not the distribution will be exposed to income taxes, and possibly to a 10 percent penalty for early distribution.
You can eliminate the risk of exposing your rollover to taxes by moving your IRA via a trustee-to-trustee transfer instead. Technically, this is not even a rollover; at your instructions, your current trustee would transfer your IRA balance to another qualified trustee without the money ever passing through your hands.
Before making any kind of transfer or rollover, you should take the opportunity to comprehensively evaluate the status of your IRA. Here are some of the issues involved:
- Check your current CD renewal date. Coordinating a transfer with the expiration of your current CD will help you avoid a possible penalty for early withdrawal from that CD.
- Re-evaluate the role of your IRA. Before you choose what to do with your IRA next, you should make sure you have a clear objective in mind for this money. Are you close enough to retirement age that you expect to be tapping into this money soon, or are you tying to grow it for the long term? Is this your primary source of retirement funding, or is it a complement to other retirement assets?
- Decide on the right vehicle and term for your next investment. The above analysis should inform what you do with the money next. While CDs should earn you more than money market accounts or savings accounts, they are not the best growth vehicle if you are several years away from retirement. If you do opt to stay in a CD, decide how long a term you want, remembering that the best CD rates will typically be found in longer-term CDs.
- Shop around. Once you are clear on what you want, you can shop around for the right provider, whether this involves pursuing the best CD rates or the most appropriate long-term investment expertise.
- Review your ongoing contributions. Once you have decided what to do with your current IRA balance, don't neglect to continue making new contributions to the plan. You must also decide how these new contributions should be invested.
Again, you should be able to move your IRA pretty seamlessly via a trustee-to-trustee transfer, but your choice of where to transfer the IRA could be more effective if you take the time to step back and review the program before you make your move.
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