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  1. #1

    IRA/CD withdrawal questions

    Hope this is the right forum. I hope I didn't really screw myself up. I am 55. I have been working for the same attorney for 25 years. I have no retirement, 401K, or anything like that through my employer (I know, I kick myself in the butt every day, but that is another topic). Years ago, I started a personal traditional IRA with some money I had saved up. It has been in 18 month CD's for years, at least 10, with my local bank, earning almost no interest. I was reading about online banking interest rates getting a slightly better return. When my CD's matured last week, I closed the account and had the money transferred to my personal checking account. It was 13,000.00 dollars. I opened an Ally Traditional IRA, an Ally 5 year CD and a Vanguard Target Retirement Fund 2025. The plan was to put 5,000.00 in Vanguard, 5,000.00 in the Ally 5 year CD and the other 3,000.00 into the Ally Traditional IRA. When I deposited 5,000.00 in the Vanguard account, it said there was a 6,500.00 limit per year.

  2. #2
    Does that mean I cannot put another 5,000.00 in the Ally CD?
    Sorry this is so long. I have no idea what I am doing. Was trying to put my money somewhere earning a little bit more interest. I don't know anything about rollovers, or how else I should have closed the account and distributed the money. I am afraid I am going to have to pay penalties and taxes on this money (13,000.00) when I was just trying to split it into separate, higher interest, accounts, and SAVE it.
    The way I understand it, I have 60 days to do something with it. Any assistance would be appreciated.

  3. #3
    There is a limit to yearly contributions. You may have created a worse problem by having it sent to your bank account rather than doing the transfer to the various accounts. Get any documentation that was sent to you and look at it. You will probably find that taxes and the penalty for early withdrawal were taken out of the money in the original account. What you do then is up to you.

  4. #4
    No, maifleur, you're on the wrong track
    angel, there's a procedure called a "tax free rollover" which is what's used to move an IRA balance from one financial institution to another. As the name says, it's tax free. There is no dollar limit on how much can be moved but it may be doable only one time per year (that's unclear but it's the IRS's position) and I think a rollover has to go to just one destination, and not three, but on that I'm not sure. It is a procedure, it needs to be done a certain way, but this is vanilla and a daily event to any institution holding IRA and other retirement plan balances.
    Your local bank should NEVER let you do what you did, they should have cautioned you.

  5. #5
    My suggestion at this point is you may need to get a CPA to help you, and expect in advance than many will have no experience with this. I would also go to the bank, tell them you relied on them and they let you down. Next, try to completely unwind what you did by closing the accounts you opened and getting the money back into the local bank IRA in its entirety. The local bank needs to cooperate with you to allow you to do this.
    Then, start all over again. When you do a tax free rollover, the check for the full balance is usually made payable to the institution the new account is located, not to you. Send the check to one place - Vanguard is a good choice.
    If you're not able to unwind and start again, you won't be happy with the outcome. What you've done is called an "early withdrawal of the IRA" since you're not yet 59 1/2. In addition to the gross amount being subject to income tax for you this year (which is always the case when an IRA account is distributed), the early withdrawal causes you to be subejct to an added 10% penalty. That's why you want to unwind what was done and start again. I hope it's possible but maybe not
    Good luck, report back how you fare.



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