Q: Where is the best place to transfer a traditional IRA if I want complete safety and the ability to get my hands on the money in a hurry if need be?
A: If you want the best guarantee available that you won't lose money, you should put your IRA in an FDIC-insured deposit account. You can go to the FDIC website at fdic.gov and use the "Bank Find" tool to make sure that any bank you are considering is covered by FDIC insurance.
But you should be aware that even if you are banking at an FDIC-insured institution, there may be limits on the extent of your coverage. First of all, FDIC-insured banks may offer a variety of investment products that are not covered by the insurance. When you are setting up your account, you should confirm that it is in an insured deposit account.
Also, if your IRA is large, it may exceed the $250,000 limit on FDIC insurance. That limit applies to all your deposits at any one bank, so if your IRA exceeds $250,000, you may want to split your IRA between different banks to ensure all of your funds are covered. For the purposes of determining FDIC insurance, any deposits you have at a given bank are totalled together, so simply spreading your money among different accounts at one bank will not stop you from exceeding the $250,000 limit. However, for the purposes of determining coverage, IRA money is considered separately from any taxable accounts you might have.
The three major types of deposit products for you to consider are savings accounts, money market accounts and certificates of deposit (CDs). Savings and money market accounts allow you to withdraw your money at any time, but they are not supposed to be used like a checking account, so you are likely to find a limit on the number of withdrawals you can make per month. CDs, on the other hand, require you to commit your money for a specified time period. If you want your money sooner, you will probably have to pay a penalty.
Whichever of these products you choose, be advised that there is a significant difference in the rates offered by various banks, so be sure to shop around to get a good rate.
Finally, keep in mind that if you are not yet 59 1/2 years old, there are tax penalties for taking money out of a traditional IRA. So, even if you choose a bank account that allows you immediate access to this money, you should be careful not to incur a tax penalty by drawing on it too soon.
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