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I have a Roth IRA which is in a CD at a Credit Union. It has just matured. Can I transfer that money into an investment product without being taxed for the transfer.

I am 65 and have had the account for several years.

May 14, 2013 by Louise in  |  Flag
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5 votes

Yes you can. It is important to move the money as a rollover or a transfer instead or a distribution. The new account should be opened as a Roth IRA also.

Hope this helps.

Comment   |  Flag   |  May 14, 2013 from Kingsport, TN

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5 votes

Louise,

The quick answer to your question is; yes you can move the funds from your CD into something else without being taxed. With a Roth IRA the money is generally not taxed anyway since the contributions were made after tax. As long as you leave the funds inside a Roth IRA you will continue to be able to have the earnings grow tax deferred and when taken out they will be tax free.

You can kind of think of the Roth IRA as an umbrella. As long as the funds stay under the umbrella they continue to receive the tax treatment of the Roth IRA. Under the umbrella you can put your money in all kinds of investments. They can be placed in CDs, mutual funds, stocks, bonds, etc.

To determine what type of investment fits best for your situation I would highly recommend you speak with a Certified Financial Planner or Fee Only Investment Advisor. They can help you determine what type of investment is best suited for you.

Comment   |  Flag   |  May 14, 2013 from Uniontown, OH

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Rich Winer Level 20

As long as you have held the Roth IRA for five years, any and all distributions would be tax-free. You can also roll over the money in your Roth CD to any investment product held inside a Roth IRA account and your money would continue to grow tax-free. For example, you could open a Roth IRA account at a discount brokerage firm like TD Ameritrade and rollover the money in your credit union CD. In your new Roth IRA brokerage account, you could invest in stocks, bonds, mutual funds, etc. However, if you cashed out your CD and transferred the money to a taxable bank or brokerage account, your money would no longer grow tax-free. If you objective is simply to invest in something other than a CD (perhaps stocks, bonds or mutual funds), I would recommend doing so within a Roth IRA account at your credit union or elsewhere.

1 Comment   |  Flag   |  May 14, 2013 from Woodland Hills, CA
Rich Winer

I must clarify my answer... You can actually withdraw your basis (the amount you contributed to your Roth IRA) at any time with no tax consequences. Any growth must be held in the Roth for five years in order to be withdrawn tax-free. Once again, your best investment move is to keep your money invested inside a Roth IRA to keep it growing tax-free.

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Flag |  May 14, 2013 near Woodland Hills, CA

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Louise, Yes you can transfer the money without incurring any taxes but the transfer has to be done correctly. The idea here is to transfer the money without it actually going through your hands (no checks made out to you). That is called a "Trustee to Trustee" transfer or a "Direct" transfer. The Credit Union may have an investment service that can do the transfer for you. If not, you can open an account with an advisor or directly with an investment products provider such as Vanguard and they can handle the transfer for you. Have you thought about which product to invest in and what your expectations are for service after purchasing the product? The answers to these questions will help guide you to the best place for you. One final thought – Make sure you set up a beneficiary on your new account. Beneficiaries are very important on IRAs and Roth IRAs. Good luck!

Comment   |  Flag   |  May 14, 2013 from Kingsport, TN

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Hi Louise! I won't rehash the good information from my colleagues - they hit all the right points. You mentioned that you have had the money in a CD for a long time. Since you are nearing retirement age, you may want to take time to decide what the purpose of this money is for you. Is it for retirement? Or just savings with no particular goal in mind? Thinking about how you may want to use the money may help you decide what type of investment product would be appropriate for you. I do recommend spending some time with a fee-only planner to help you decide what would be a good investment for your circumstance. Best wishes to you!

Comment   |  Flag   |  May 14, 2013 from River Hills, SC

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Simply put, unitized stock funds, are, as the name implies, company stocks that are unitized along with a cash component. It allows the company to execute transactions in an orderly way. The article that Rod posted is more specific.

1 Comment   |  Flag   |  May 17, 2013 from Delray Beach, FL
Michael Steven Greenberg, CFP®

Oops wrong question....... Louise, the account you have is titled as a Roth account. You can open an investment account anywhere. So long as it is titled as a Roth account, you can transfer from any other Roth account. As others have pointed out, just be sure the check is written to the trustee of the new account and not to you.

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Flag |  May 17, 2013 near Delray Beach, FL

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