TIRA Transfer (selling CDs Before Maturity)

[MasterCard]

Hi all !

Helping my mother transfer her Traditional IRA account with CapitalOne Financial Advisors (aka CapitalOne Investment Services) to a Vanguard Traditional IRA. She has a financial advisor who is taking a nice fee and high fee funds as well. Vanguard application says we need to first "Move your transferring assets to a money market or cash account" at the old custodian, so that funds are in liquid position. This makes sense since we want to buy different Vanguard funds (VTSMX and VBMFX).

Funds at old custodian:

• Money Market - $418.31 (not sure why ...)
• CD - JPMORGAN CHASE Id 48124JPM4 - Matures 12/31/19 - $5,796.60
• FKINX - Franklin Income Fund Class A - $1,483.05
• FHAIX - Franklin High Income Fund Class A - $1,449.05
• FISEX - Franklin Equity Income Fund - $1,025.65
• FBDIX - Franklin Biotechnology - $2,524.12

Total: $12,696.78

The complication is she has a JPMorgan CD that mature in 2019. I don't understand all of the implications of selling it prematurely - please help with this. I know there will be a penalty but how much? Will she get any forms from Capital One to report to IRA while filing taxes? Anything else?

Thanks !

[seattlecyclone]

The penalty on the CD really depends. She could lose a few months' worth of interest, or more. She should get a form from Capital One, but this transfer should not result in any extra tax this year.

[stepitup]

The other thing to consider is that she wouldn't be required to transfer the full amount. She could always sell all the non-CD assets, transfer those, and let the account continue on with just the CD in it until it matures.

[MasterCard]

thanks for the replies! Right now I'm thinking to sell everything and deal with the penalty for CD. At least there will be no more financial advisor fees.

[Another Reader]

It sounds like this is a brokered CD.  I would talk to the Vanguard folks to see if it can be transferred to their brokerage account and held until it matures. 

In general, you should be able to move most mutual funds without selling them, although it may be simpler to sell the Franklin Funds, so as not to be charged a fee by Vanguard to sell them.  It would be a good idea to compare the cost of selling them before moving them to moving and then selling.  A phone call to Vanguard should confirm they can be transferred in kind and then sold.