An IRA CD combines two powerful savings tools: an Individual Retirement Account (IRA) and a certificate of deposit (CD). Together, they help you grow retirement savings safely while enjoying tax advantages. But what happens if you want to move your IRA CD to a different bank or credit union?
The process is straightforward but there are important rules to follow. If you make the wrong move, you could face taxes or early withdrawal penalties. This guide explains everything in plain English so you can transfer your IRA CD safely and confidently.
What Is an IRA CD?
Before diving into transfers, let’s quickly cover the basics.
An IRA CD is a CD held inside an IRA retirement account. Like regular CDs, IRA CDs:
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Pay a fixed interest rate
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Require you to keep money deposited for a set period (called the “term”)
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Are insured by the Federal Deposit Insurance Corporation (FDIC), typically up to $250,000 per depositor, per institution
Because the CD is inside an IRA, you also get tax benefits:
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Traditional IRA CD: Taxes are deferred until withdrawal
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Roth IRA CD: Qualified withdrawals are tax-free in retirement
Why You Might Want to Transfer an IRA CD
There are several common reasons people transfer IRA CDs:
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A different bank offers a higher interest rate
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You want better customer service or online features
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You’re consolidating retirement accounts
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You’re moving to a new financial institution
For example, imagine you opened a 3-year IRA CD earning 2.5%, but another bank now offers 4.5%. Moving your IRA CD could help your retirement savings grow faster.
Important Rule: You Transfer the Money, Not the CD Itself
This is a key concept many beginners misunderstand.
You cannot physically move the same CD from one bank to another. Instead, you:
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Close or complete the existing CD
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Transfer the money to another IRA
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Open a new IRA CD at the new institution
Think of it like moving cash from one safe to another you take the money out and place it into a new safe, not the safe itself.
Step-by-Step: How to Transfer an IRA CD
Step 1: Check Your CD Maturity Date
The maturity date is when your CD term ends. This is the best time to transfer because:
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You avoid early withdrawal penalties
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You have more flexibility
Many banks automatically renew CDs if you don’t take action, so contact your bank before maturity and tell them you want to transfer the funds.
Step 2: Open a New IRA Account
Before transferring, you need a destination account.
You can open a new IRA at:
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A bank
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A credit union
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An online bank
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A brokerage firm
Make sure the new account is the same type (Traditional IRA to Traditional IRA, or Roth IRA to Roth IRA).
Step 3: Choose a Transfer Method
There are two main ways to transfer IRA CD funds:
Option 1: Direct Transfer (Best and Safest)
This is also called a trustee-to-trustee transfer.
The new bank moves the money directly from your old IRA to your new IRA. You never touch the funds yourself.
Benefits:
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No tax risk
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No penalties
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No deadlines to worry about
Example:
Your new bank contacts your old bank and handles everything for you.
This is the recommended method.
Option 2: 60-Day Rollover (More Risky)
With this method:
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Your bank gives you the money
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You deposit it into a new IRA within 60 days
If you miss the 60-day deadline, the Internal Revenue Service (IRS) may treat it as an early withdrawal, which can result in:
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Income taxes
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A 10% early withdrawal penalty (if you’re under age 59½)
Example:
You withdraw $10,000 from your IRA CD. If you redeposit it into another IRA within 60 days, you’re safe. If you miss the deadline, you may owe taxes and penalties.
Watch Out for Early Withdrawal Penalties
If you transfer your IRA CD before it matures, your bank may charge a penalty.
This penalty usually equals several months of interest.
Example:
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Your IRA CD earns $500 per year
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Early withdrawal penalty = 6 months interest
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Penalty = $250
That’s why waiting until maturity is usually the smartest move.
Tips to Avoid Taxes and Fees
Follow these four simple rules:
1. Wait Until Maturity When Possible
This helps you avoid bank penalties.
2. Use Direct Transfers
This eliminates tax risk and simplifies the process.
3. Follow the 60-Day Rule if Doing a Rollover
Missing this deadline can trigger taxes and penalties.
4. Transfer to the Same Type of IRA
Traditional → Traditional
Roth → Roth
Mixing account types incorrectly can cause tax problems.
Real-Life Example
Let’s say Sarah has $20,000 in a 2-year IRA CD earning 2%.
She finds another bank offering 4%.
Here’s what she does:
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Waits for her CD to mature
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Opens a new Traditional IRA at the new bank
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Requests a direct transfer
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Opens a new IRA CD earning the higher rate
Result:
Her retirement savings grow faster without taxes or penalties.
What Happens If You Cash Out Instead of Transfer?
If you withdraw the money and don’t put it back into an IRA:
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You’ll pay income taxes
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You may pay a 10% penalty (if under 59½)
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You lose retirement tax benefits
This can significantly reduce your savings.
For example, withdrawing $20,000 early could cost:
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$4,400 in taxes (22% tax bracket)
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$2,000 penalty
Total loss: $6,400
That’s why transferring not withdrawing is so important.
Can You Transfer an IRA CD Anytime?
Yes but timing matters.
Best time:
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At maturity
Possible but costly:
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Before maturity (penalty may apply)
