an illustration showing 72 T invested in a CD
Do you know if there is a website I can refer my client to reflect an illustration showing 72T invested in a CD. where do I even begin?
Do you know if there is a website I can refer my client to reflect an illustration showing 72T invested in a CD. where do I even begin?
Permalink Submitted by Alan Spross on Wed, 2009-04-08 23:24
I have not seen a website or even an article on how best to manage CDs as part of a 72t plan. A large factor would be whether the CD IRA is the only IRA account that is part of the plan, and/or if the CD is a broker sold CD in a brokerage IRA vrs a free standing bank CD IRA. The 72t requirements remain the same regardless of the investment format, so the main issue here is how to get the 72t annual distribution done without incurring an early withdrawal penalty for CD withdrawals prior to maturity. I doubt very many banks allow for exceptions because the IRA owner has a 72t plan in place.
Therefore, the taxpayer must maintain enough liquid assets in at least one of the plan IRA accounts that can be used to fund the annual distributions in the usual calendar year cycle. It is easier to do that using broker sold CD accounts that can all be held in the brokerage account. These CDs are FDIC insured, and typically pay semi annual interest into the sweep MM fund in the same IRA. Other investments can be held in the IRA as well, so the taxpayer is not dependent on cashing in (or selling in the case of broker sold CDs) the CD in order to fund the 72t distributions. Individual bank CD accounts also frequently use up limited rollover opportunities because they may offer offer direct transfers to another IRA.