How Can I Put My IRA in a High Yield CD?

Individual Retirement Accounts (IRAs) come in different stripes. An IRA could be traditional, in which case it is held in a bank, mutual fund or brokerage account, and you have access to a select set of funds or stocks as part of your investment portfolio. Traditional IRAs are usually managed by professional fund managers. Self-directed IRAs are held in brokerage firms and you have the freedom to invest in whatever stocks or bonds you like. Some self-directed IRAs are held in special trust accounts for investment in real estate and other specialized areas of investments.

High Yield CDs

IRA CDs are FDIC-insured for up to $250,000. The first step in transferring your current IRA into a high yield CD is to search for a high yield CD. A good place to start will be the financial institution where your IRA is currently held, as this will make the transition smoother. You can also check other financial institutions with which you do business. If the yield is the most important factor in your decision making, use a service like Bankrate.com to compare rates across the country (see Resources). ING Direct, for example, provides high yield CDs at competitive rates for terms ranging from 6 months to 5 years (see Resources)

Once you have decided on where to open an IRA CD account, contact the financial institution in charge of your current IRA and tell them of your intentions. If your account is with an online brokerage, you may be able to initiate the rollover or transfer process online. You will be required to fill out some paperwork authorizing your financial institution to carry out the transfer. In a direct rollover or transfer once you have authorized the financial institutions involved you will need to do no more. Your funds will be transferred directly from one account to the other.

However, if it is a 60-day or indirect rollover, you will receive a check from the financial institution where your IRA is currently held and will then have to complete the rollover on your own by using the check to open your new high yield IRA CD account. Make sure you complete the process in 60 days. If you don't, your rollover funds will be treated as income and you will owe taxes on it. Also if you are younger than 59 1/2 you will pay a 10 percent penalty for receiving an early distribution.