Ask Terry Questions Traditional IRA

Traditional IRA

By Terry Savage on March 29, 2014 | Chicken Money

Hello Terry,
Today I saw that the GE Capital Retail Bank is offering the following…
the GECRB IRA CD’s lenient early withdrawal provisions for oldsters.

Its CD disclosures provide that no penalty is imposed on early withdrawals “when an account is an IRA and the owner … reaches the age of 59½.”

According to bank reps, this means exactly what it says.

Provided you’re over 59½, you may withdraw all or part of your balance any time, penalty-free, for any reason, including taking an IRS-mandated required minimum distribution (RMD), establishing a higher-yielding CD elsewhere or even opening a better CD at GECRB
The 5 yr. rate is 2,25 %.
I am tempted as the rate is great & I won’t need the money as I have other savings .
I have $150,000. that just matured from another bank , plan to use the yearly RMD.
I’d love to have your thoughts as I have always read & followed your suggestions with luck.
Thank you

Terry Says:  In the “olden” days about 25 years ago, nearly every bank would allow seniors to break a CD in an IRA in order to make RMDs.  I remember researching that, and I think it was not a requirement, but a nicety.  Now that works if rates are going up, and you get to renew your CD at a higher rate after your make your RMD.  But check the fine print. They may allow a withdrawal, but the rest of the money might be required to stay in the old, lower yielding CD.  I don’t think 2.5% is “enough” to lock all your money up for 10 years.  But you might split it between two CDs, one for the longer term, and that way you would only be half wrong —  or half right, if rates do rise!

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