IRA CD Renewal For Better Rate At Same Bank.

benjamins4me | Apr 21, 2024 | 8 posts since 2010

A traditional IRA CD matured so I called the bank to get a better rate on a different time length. A couple days later I now have a docu sign and they checked the "withdrawl" box. That seems wrong since it is staying in the same bank, just a different time length CD. I will call tomorrow but wanted to see if anybody has had this happen to them?

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Answers

milty | Apr 21, 2024 | 1,672 posts since 2018

I've rolled over IRA CDs, but don't recall if there was some document having checked a "withdrawal" box. Assuming the CD rolled over correctly with the rate and maturity date you expected then I doubt there is anything to worry about. Even when rolling over to a different FI the procedure usually involves a check being paid to the new FI for the benefit of the owner, i.e., no distribution.

choice1 | Apr 21, 2024 | 370 posts since 2023

And remember some FIs treat an IRA charitable distribution when the IRA funds are first moved internally to your nonIRA savings/checking account which then cuts the check against that nonIRA account making it payable to the charity. Not an exact direct transfer!

111 | Apr 21, 2024 | 672 posts since 2019

I agree with what P_D said. I'd add that this is often an inherently confusing situation because some FIs may register a CD as "its own" individual IRA account, wheres others may register a CD as one entity in an IRA account "wrapper" that can also contain other entities - i.e., other CDs, a savings account, etc. So it's not always easy to know whether "withdrawal" means from the CD, or the IRA!

A couple of year ago I had some add-on CDs in an IRA wrapper account. I called to cash them out early within the same IRA (accepting the very small early withdrawal penalty) in order to start other add-on CDs which had better rates. By the CSRs language I could tell he was possibly confused and might be attempting to remove funds from the IRA. I asked for another CSR, who performed the correct action. Not a lot of money involved, but who wants additional tax forms or fees, especially if unexpected?

TheRealMAGA | Apr 21, 2024 | 23 posts since 2023

Yes, it happened to me last year and I only found it about two weeks ago when I was doing taxes. I had a traditional and a roth with about $26k in each. Now I have to go back and probably redo tax year 23. Most likely I’ll have to pay fees and interest. Luckily for me it was not my big retirement accounts. For me I had called them and told them what I wanted to do, but instead they put my funds in my regular checking. Needless to say I was thoroughly PO. I went and took it out on the market by buying index puts all last week. I normally would do this, but this mistake turned out to be a blessing. Probably my best week trading in several years.

TheRealMAGA | Apr 21, 2024 | 23 posts since 2023

*I normally wouldn’t do this.

mrknicks | Apr 23, 2024 | 14 posts since 2022

I had this happens a few years ago when i moved a CD to another bank. I got a letter from the IRS that I owed thousands of dollars in taxes for a withdrawal. It was NOT a withdrawal, it was a custodian to custodian transfer but it was classified incorrectly. It took a month (and hundreds of dollars in accountants fees) to prove to the bank and the IRS that the bank got it wrong.

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