You can roll over an IRA into a CD (certificate of deposit) without penalty under certain circumstances. Your age is one of the primary factors in avoiding the early withdrawal penalty.
Definitions
When you transfer money from one IRA account to another, it's known as a rollover. There is no penalty when you roll over funds within the required 60-day time frame. When you withdraw money from an IRA, it's known as a distribution. If you take a distribution under most circumstances before you're age 59 ½, you will be subjected to a 10 percent early withdrawal penalty.
IRA Investments
IRA accounts can be invested in numerous ways, including in CDs. If you want to roll over your IRA account into a new IRA account that is invested in CDs, you may do so without penalty provided the money is redeposited into the new IRA within 60 days.
Benefits
Investing your IRA in a CD has certain benefits. Primarily, it is a low-risk investment, and your contribution will be protected. Additionally, CD-based IRAs are covered up to $250,000 by the FDIC. On the other hand, these investments tend to yield lower returns than higher-risk investments like stocks.
Limitations
If your IRA is currently invested in a CD, you will have to wait until its maturity to roll it over into a new CD-based IRA. Additionally, there is a one-year limit on IRA rollovers for each account.
Considerations
If you are older than age 59 ½, you may take a distribution from your traditional IRA and redeposit it into a CD without paying the 10 percent penalty; however, you will be required to claim it as income and pay the appropriate tax on your withdrawal.