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 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.
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.
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.
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.