Author Topic: IRA CD grace period  (Read 742 times)

Catica

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IRA CD grace period
« on: March 23, 2020, 11:11:11 AM »
Hi,

My dad's IRA CD matured on Saturday.  There is a 10 day grace period. My dad is planning to transfer the money to Ally Bank IRA CD.  I was worried that he wouldn't be able to do the transfer in 10 days but the bank is telling me that the 10 days grace period doesn't apply in this case because he is over 59.5 yrs old and that money can just sit and wait for the transfer to happen.  Does this sound right?  When I talked to someone at Ally bank they told me that we need to start the transfer process ASAP because it may take up to 3 weeks to happen and that it would be wise to open IRA savings account at the current bank to hold that money until the transfer happens.  So, I'm a bit confused whether it's OK to do nothing at let the money to just sit until the transfer happesn or to transfer it to IRA savings for the time being.  Anyone know?

Thank you
Catica

blue_green_sparks

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Re: IRA CD grace period
« Reply #1 on: March 23, 2020, 11:41:48 AM »
if the money just went to cash but is still in his IRA, no worries all is good. He just need to do his once a year allowed IRA 'rollover' and it is best to have the check made out directly to Ally. If the check did go to him then there is some more paperwork but you still have 60 days to get the money into the Ally IRA. Google IRA rollover 60 day rule. This way he avoids taxes...he is exempt from the extra 10% penalty tax being over 59.5.
« Last Edit: March 23, 2020, 11:45:10 AM by blue_green_sparks »

terran

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Re: IRA CD grace period
« Reply #2 on: March 23, 2020, 11:44:14 AM »
I would think the money would stay in the IRA, just not be invested in a CD. Kind of like how money that's not invested is still in an IRA. I could be wrong though, as I've never put money in an IRA CD.

Worst case, if it does somehow get booted out of the IRA then this will be a 60-day rollover (as long as it get's in to the Ally CD IRA within 60 days of when it's distributed from the Other bank's CD). You can do only one of these per rolling 12-month period (not calendar year), so be careful with that, but otherwise it shouldn't matter.

I would be concerned that the bank is saying something is different because he's over 59.5. The only difference about being over 59.5 is that you can make qualified withdrawals that aren't subject to an early withdrawal penalty, but you'll still pay tax if it's a traditional IRA, and you can't put the money back in an IRA except through a 60 day rollover. Given that comment it seems like someone isn't understanding something about this.

Catica

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Re: IRA CD grace period
« Reply #3 on: March 23, 2020, 11:51:36 AM »
if the money just went to cash but is still in his IRA, no worries all is good. He just need to do his once a year allowed IRA 'rollover' and it is best to have the check made out directly to Ally. If the check did go to him then there is some more paperwork but you still have 60 days to get the money into the Ally IRA. Google IRA rollover 60 day rule. This way he avoids taxes...he is exempt from the extra 10% penalty tax being over 59.5.
Not, sure I understand want it means "if the money just went to cash".  My father didn't get any money.  The CD matured and the money is still in the bank.
He is intending to have the check mailed to Ally directly but first he needs to mail the transfer form to Ally so they can then ask the other bank to send them the check.

Catica

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Re: IRA CD grace period
« Reply #4 on: March 23, 2020, 11:54:23 AM »

I would be concerned that the bank is saying something is different because he's over 59.5. The only difference about being over 59.5 is that you can make qualified withdrawals that aren't subject to an early withdrawal penalty, but you'll still pay tax if it's a traditional IRA, and you can't put the money back in an IRA except through a 60 day rollover. Given that comment it seems like someone isn't understanding something about this.

I was confused why the bank was even telling me anything about 59.5.  I think they were confused thinking that my dad was worried that he will pay penalty.

blue_green_sparks

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Re: IRA CD grace period
« Reply #5 on: March 23, 2020, 12:19:52 PM »
if the money just went to cash but is still in his IRA, no worries all is good. He just need to do his once a year allowed IRA 'rollover' and it is best to have the check made out directly to Ally. If the check did go to him then there is some more paperwork but you still have 60 days to get the money into the Ally IRA. Google IRA rollover 60 day rule. This way he avoids taxes...he is exempt from the extra 10% penalty tax being over 59.5.
Not, sure I understand want it means "if the money just went to cash".  My father didn't get any money.  The CD matured and the money is still in the bank.
He is intending to have the check mailed to Ally directly but first he needs to mail the transfer form to Ally so they can then ask the other bank to send them the check.

Ok, so yes. basically it went to cash (in his IRA account). No rush to do anything. He should call the institution where the CD matured and tell them he wants to do a direct rollover. He will probably have to set up an IRA with Ally first if he doesn't have one already.

MustacheAndaHalf

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Re: IRA CD grace period
« Reply #6 on: March 23, 2020, 12:36:44 PM »
My dad's IRA CD matured on Saturday.  There is a 10 day grace period.
During those 10 days, your dad can decide not to renew the CD.  Your dad might be able to go online, and transfer all the money out.  At a bank I had (Discover), they didn't allow a full transfer online... so I transferred all but $1 out of the CD, and let the $1 renew.

Catica

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Re: IRA CD grace period
« Reply #7 on: March 23, 2020, 12:45:31 PM »
OK, thank you all.  I opened the account at Ally and filled out the form and my dad is mailing it today.  I think all should be smooth!