I have a traditional IRA (T.IRA) that has a large certificate of deposit (CD) at a credit union. The credit union says that in order to do the Roth conversion, I have to give up my CD (2 1/2 years left to maturity), and, if I want a CD in the new Roth account, I would have to get one at the current interest rate which is considerably lower. The interest rate differential would cost me about $200 over the remaining 2 1/2 years of my current CD.

I have pushed back hard, calling it an undisclosed fee for doing a Roth conversion, in the disguise of a requirement to terminate any and all CD’s in the T.IRA account. The banker checked with the IRA people, and said sorry, that’s the way the system is set up. I appealed again, with no luck.

I ranted and raved that a Roth conversion is the TRANSFER of assets from a T.IRA to a Roth IRA, not the liquidation of the T.IRA and the building of a new Roth from the cash proceeds. But to no avail.

Maybe I’m wrong, is there such a requirement (they never claimed there was, just that “that’s how the system is set up”).

I should add that they say there would not be the usual early termination penalty for a CD of up to a year’s interest. So the amount I would be out is just the interest rate differential between my old CD’s rate and a new CD’s rate.

I know that $200 isn’t much, but the nickel-and-diming of people by these kinds of financial institution games no doubt add up to tens of billions of dollars.

After posting a second negative review on their Facebook page, they want to “reach out” to me (again). I just want to be prepared if they try to bullshit me about there being some kind of requirement.

Or they may argue that it can go both ways — if interest rates are rising, the early termination of an old CD is to the consumer’s advantage. But we’ve been in a nearly 40-year secular trend of falling interest rates, so the credit union has been benefiting much more than losing out from a system like this. I kind of think if we got into a long-term secular rise in interest rates, they’d change the system.

Has anyone else run into this kind of B.S.? Thanks much for any help.
-Jim