Low interest rate on IRA CD
We have about 500,000 in IRA CD’s at rates between .65 and 1.15. Is it a wise idea to take the penalty of between 3 and 6 months of interest to reinvest in the now going rate of 3.25% at the same banks where money is currently? The CD’s expire in April and May of 2023. I Ama conservative investor and have already maxed the allowance on Bonds. Thank you for your guidance.
Terry Says
Consider switching to Treasury Bills, currently paying over 4%. It’s c0mplicated but if you roll your IRA to a Fidelity or Vanguard IRA brokerage account, you can buy T-bills in your IRA. But banks won’t act as IRA custodians for TreasuryDirect IRA accounts.
By the way, if these CDs are in an IRA and you’re over age 72, there will be no penalty for breaking them early!
Read this: https://www.terrysavage.com/t-bills-beat-cds/
Ask the bank to calculate the dollar amount of the penalty, and compare it to the interest you would earn for the next 6 months. Might be worth taking a penalty on at least some of your CDs.
