How To Transfer an IRA to a CD

by Mark P. Cussen ; Updated July 27, 2017

Recent market turbulence has caused many IRA investors to look for safer havens for their hard-earned savings. Many older, more conservative investors who dabbled in mutual funds are moving their assets back into a CD (certificate of deposit) or other guaranteed investments. This process is relatively simple in most cases.

Step 1

Shop for the best CD rates either online or at your local bank. When you find the CD that you want, purchase it in the name of an IRA. If you purchase a taxable retail CD using the proceeds from your current IRA, then you will have to take a taxable distribution from your IRA in order to do so (which is permissible, except that you might have to pay unnecessary taxes.)

Step 2

If you are moving your assets from one IRA to another, complete the application and transfer forms for your new IRA and submit them to your new custodian, who will contact your current IRA administrator and tell them to transfer the funds in the account. If you are purchasing your CD inside the same IRA, simply sell your current holdings or else use cash already in the account to do so.

Step 3

Wait for the funds to be transferred over from your previous custodian. This can take a couple of weeks. The process is faster if your previous IRA is already in cash, but it may take longer if your previous holdings must be liquidated first.

Step 4

Use the proceeds from your IRA transfer to purchase the CD in your new account. This can be done as soon as the money arrives. Your new custodian may do this automatically. There is no penalty for liquidating your old IRA per se, but you might have to pay an early-withdrawal penalty for liquidating the investment inside the IRA, depending upon what it is. For example, if you are currently invested in an annuity, B-share mutual fund or bond or CD that has not matured yet, then you may be assessed an early-withdrawal penalty.

Step 5

Decide whether you want to have the interest from the CD paid to you in the form of distributions or reinvested. If you do not need the additional income and are not required to take distributions from your IRA, then reinvestment may be a wise option.

About the Author

Mark Cussen has more than 17 years of experience in the financial industry. He received his B.S. in English from the University of Kansas and became a Certified Financial Planner in 2001. He has published financial educational articles on such websites as Investopedia and Money Crashers. He also provides financial education and counseling for members of the U.S. military and their families.