Having a CD in an IRA?

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dbc47
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Having a CD in an IRA?

Post by dbc47 »

I saw a discussion somewhere, maybe not here, that someone wanted to put part of their IRA into a CD to take advantage of the current rates. I'm not debating if that is a good idea or not, but how would that work if one had to take a required RMD? You can't just sell part of a CD?
Silk McCue
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Re: Having a CD in an IRA?

Post by Silk McCue »

You wouldn’t have to sell part of the CD in the IRA. You would sell other IRA assets to satisfy the RMD.

Cheers
alex_686
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Re: Having a CD in an IRA?

Post by alex_686 »

One could take a distribution of securities rather than cash. Most CDs have a par value of 100.
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Silk McCue
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Re: Having a CD in an IRA?

Post by Silk McCue »

alex_686 wrote: Sat May 27, 2023 6:39 pm One could take a distribution of securities rather than cash. Most CDs have a par value of 100.
Please explain what that means relative to end of year value when calculating RMD across all IRA holdings including the CD.

Cheers
Retired 2017
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Re: Having a CD in an IRA?

Post by Retired 2017 »

When I buy securities such as bonds and CDs I usually prefer smaller denominations. I would prefer 5 $2000 CDs to 1 $10000 CD. This is sort of an exaggerated example but the idea is if I need to sacrifice the interest to cash out for a payment I don't have to sell the entire $10000 CD when all I needed was $3000. I already know the RMD range well in advance so I would keep that in mind for any Bond or CD purchases. I also know what my other securities will be generating through the year. I would run the numbers if there was a meaningful break in interest for say a jumbo CD. I know that 5 CDs on a spreadsheet takes up 5 lines, and 1 CD takes up 1 line, but speadsheets are a playground.
alex_686
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Re: Having a CD in an IRA?

Post by alex_686 »

Silk McCue wrote: Sat May 27, 2023 6:48 pm
alex_686 wrote: Sat May 27, 2023 6:39 pm One could take a distribution of securities rather than cash. Most CDs have a par value of 100.
Please explain what that means relative to end of year value when calculating RMD across all IRA holdings including the CD.
Well, instead of taking out $X you take out that much in securities. i.e. CDs, bonds, stocks, funds, etc.

Why wouldn’t this work? It has been a few years since I have had to process a IRA distribution.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Silk McCue
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Re: Having a CD in an IRA?

Post by Silk McCue »

alex_686 wrote: Sat May 27, 2023 7:10 pm
Silk McCue wrote: Sat May 27, 2023 6:48 pm
alex_686 wrote: Sat May 27, 2023 6:39 pm One could take a distribution of securities rather than cash. Most CDs have a par value of 100.
Please explain what that means relative to end of year value when calculating RMD across all IRA holdings including the CD.
Well, instead of taking out $X you take out that much in securities. i.e. CDs, bonds, stocks, funds, etc.

Why wouldn’t this work? It has been a few years since I have had to process a IRA distribution.
In my reply to the OP I told them “ You wouldn’t have to sell part of the CD in the IRA. You would sell other IRA assets to satisfy the RMD.” So we are on the same page with that.

I was asking about what “Most CDs have a par value of 100” means in the context of their question.

Cheers
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typical.investor
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Re: Having a CD in an IRA?

Post by typical.investor »

Silk McCue wrote: Sat May 27, 2023 7:24 pm
alex_686 wrote: Sat May 27, 2023 7:10 pm
Silk McCue wrote: Sat May 27, 2023 6:48 pm
alex_686 wrote: Sat May 27, 2023 6:39 pm One could take a distribution of securities rather than cash. Most CDs have a par value of 100.
Please explain what that means relative to end of year value when calculating RMD across all IRA holdings including the CD.
Well, instead of taking out $X you take out that much in securities. i.e. CDs, bonds, stocks, funds, etc.

Why wouldn’t this work? It has been a few years since I have had to process a IRA distribution.
In my reply to the OP I told them “ You wouldn’t have to sell part of the CD in the IRA. You would sell other IRA assets to satisfy the RMD.” So we are on the same page with that.

I was asking about what “Most CDs have a par value of 100” means in the context of their question.

Cheers
I disagree that you would necessarily need to sell other assets.

I had a 46,000 brokered CD in an inherited IRA and took out 8,000 as an RMD. They were less than par when transferred ($97.90) so the RMD amount I believe was actually $97.90 X 80.

IRAs can contain bank CDs that can’t be broken without penalty. Those are not brokered CDs.
alex_686
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Re: Having a CD in an IRA?

Post by alex_686 »

Silk McCue wrote: Sat May 27, 2023 7:24 pm I was asking about what “Most CDs have a par value of 100” means in the context of their question.
Par value is a bond person way of saying denomination. Most bonds are issued at 1000 par, so that is the minimum you can transfer. CDs tend to be $100. Stocks are whole number of shares, not fractional.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Silk McCue
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Re: Having a CD in an IRA?

Post by Silk McCue »

typical.investor wrote: Sat May 27, 2023 7:40 pm
Silk McCue wrote: Sat May 27, 2023 7:24 pm
alex_686 wrote: Sat May 27, 2023 7:10 pm
Silk McCue wrote: Sat May 27, 2023 6:48 pm
alex_686 wrote: Sat May 27, 2023 6:39 pm One could take a distribution of securities rather than cash. Most CDs have a par value of 100.
Please explain what that means relative to end of year value when calculating RMD across all IRA holdings including the CD.
Well, instead of taking out $X you take out that much in securities. i.e. CDs, bonds, stocks, funds, etc.

Why wouldn’t this work? It has been a few years since I have had to process a IRA distribution.
In my reply to the OP I told them “ You wouldn’t have to sell part of the CD in the IRA. You would sell other IRA assets to satisfy the RMD.” So we are on the same page with that.

I was asking about what “Most CDs have a par value of 100” means in the context of their question.

Cheers
I disagree that you would necessarily need to sell other assets.

I had a 46,000 brokered CD in an inherited IRA and took out 8,000 as an RMD. They were less than par when transferred ($97.90) so the RMD amount I believe was actually $97.90 X 80.

IRAs can contain bank CDs that can’t be broken without penalty. Those are not brokered CDs.
No need to disagree. I specifically stated that “You wouldn’t have to sell part of the CD in the IRA.”, not that you couldn’t.

We are both on the same page I believe. The interpretation is just a bit muddied.

Cheers
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typical.investor
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Re: Having a CD in an IRA?

Post by typical.investor »

Silk McCue wrote: Sat May 27, 2023 8:39 pm
typical.investor wrote: Sat May 27, 2023 7:40 pm
Silk McCue wrote: Sat May 27, 2023 7:24 pm
alex_686 wrote: Sat May 27, 2023 7:10 pm
Silk McCue wrote: Sat May 27, 2023 6:48 pm

Please explain what that means relative to end of year value when calculating RMD across all IRA holdings including the CD.
Well, instead of taking out $X you take out that much in securities. i.e. CDs, bonds, stocks, funds, etc.

Why wouldn’t this work? It has been a few years since I have had to process a IRA distribution.
In my reply to the OP I told them “ You wouldn’t have to sell part of the CD in the IRA. You would sell other IRA assets to satisfy the RMD.” So we are on the same page with that.

I was asking about what “Most CDs have a par value of 100” means in the context of their question.

Cheers
I disagree that you would necessarily need to sell other assets.

I had a 46,000 brokered CD in an inherited IRA and took out 8,000 as an RMD. They were less than par when transferred ($97.90) so the RMD amount I believe was actually $97.90 X 80.

IRAs can contain bank CDs that can’t be broken without penalty. Those are not brokered CDs.
No need to disagree. I specifically stated that “You wouldn’t have to sell part of the CD in the IRA.”, not that you couldn’t.

We are both on the same page I believe. The interpretation is just a bit muddied.

Cheers
Ok, just to be clear - I neither sold the CD nor other assets in the IRA to meet the RMD. I merely transferred them out to taxable.

The CD market is rather illiquid so I would prefer to transfer.
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22twain
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Re: Having a CD in an IRA?

Post by 22twain »

dbc47 wrote: Sat May 27, 2023 6:29 pmhow would that work if one had to take a required RMD? You can't just sell part of a CD?
Some/many banks have IRA CDs that you can "break" without penalty specifically for taking RMDs. My wife has one of these. She had to request an automatic annual distribution of the exact RMD amount, calculated from the end-of-year CD value. The remaining money stays in the CD. I don't remember whether she did it in person at the local branch, phoned them, or mailed in a form.
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Leif
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Re: Having a CD in an IRA?

Post by Leif »

I currently have a 3 mo. T-Bill in my tIRA. When it matures soon I'm planning on a 1+ year CD. Even with Auto-roll, a CD will be less record keeping. IMO rates are probably about as high was they will get in this cycle. When RMDs start I've have another source of withdrawal in case stocks and bonds are down.
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AAA
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Re: Having a CD in an IRA?

Post by AAA »

22twain wrote: Sat May 27, 2023 9:10 pm Some/many banks have IRA CDs that you can "break" without penalty specifically for taking RMDs.
This has been my experience for CD's held directly at a bank.
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