Is it ok to cash out a Roth IRA CD to a non Roth IRA account?

[ptatohed]

What a pain in my tushy!  All this for a $1000 CD.

Ok, so I have $1000 (now worth $1035) Roth IRA CD with US Bank.  I am in the 10 day renewal period now.  When I go to see my renewal options, all I get is 5 month at 0.05%.  Ummm, unacceptable!  So I call.  It took 50 frickin minutes between the transfers and all the holds.  And I'm still not done!  They have to mail paperwork for me to sign and return.  OMG. 

Anyway, the question.  Since it is a Roth IRA CD, I thought I could only cash out (redeem) it to another Roth IRA account.  She said she can only redeem the CD to my Smartly Checking or savings.  Is it ok to redeem my Roth IRA to a non-Roth IRA account, without tax implications?

I looked it up, and if I understood correctly, I think I am ok.  I believe I have 60 days to "roll over" the $1035 to another Roth IRA account (I have a Roth IRA brokerage account with US Bank, so that's where it will go).    

Does this sound ok?  Or is it best to try and redeem the Roth IRA CD directly to my Roth IRA brokerage account?  She had told me that 'she' can't do that but, if I called the Wealth Management Department, they might be able to.  But they have limited hours and I don't feel like another 50 minute call, lol. 

Thanks! 

[Realist]

Is there an option for a full on cash withdrawl?  

It is true you may pay a penalty on this, but with CD rates at 4.25%, and anticipated to move north, it's only a matter of time before you recoup and earn more.

[ptatohed]

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@Realist wrote:

Is there an option for a full on cash withdrawl?  

It is true you may pay a penalty on this, but with CD rates at 4.25%, and anticipated to move north, it's only a matter of time before you recoup and earn more.

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Well, I consider liquidating the CD to a savings to be a cash withdrawal.  What are you considering a full cash withdrawal?  

I'm not putting it back in a CD, I will move it from Savings to my Roth IRA brokerage account.

Again, fingers crossed, I 'think' as long as I get the $1035 out of savings and into the IRA brokerage within 60 days, it counts as an Indirect Rollover and is not a taxable event.  But that is my question for the group.  

[JoeRockhead]

Yes, your understanding is correct.  A 60-day rollover back into a Roth IRA wouldn't be a taxable event.

That said, if Wealth Management can move it directly into your Roth IRA brokerage account, I'd let them.  A direct transfer is simpler, eliminates the 60-day clock, and avoids the possibility of a self inflicted paperwork issue.

[Kforce]

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@JoeRockhead wrote:

Yes, your understanding is correct.  A 60-day rollover back into a Roth IRA wouldn't be a taxable event.

That said, if Wealth Management can move it directly into your Roth IRA brokerage account, I'd let them.  A direct transfer is simpler, eliminates the 60-day clock, and avoids the possibility of a self inflicted paperwork issue.

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^^^^^ This

[ptatohed]

Ok, thanks guys.  I'll see if I can get through to Wealth Management and move the Roth CD to the Roth brokerage directly. 

If not, I guess an "Indirect Rollover" it is.  Which I'm having a hard time wrapping my head around.  I cash out the Roth CD to a regular savings, the Roth $1035 obviously co-mingles with the other thousands in the non-Roth savings, then I move $1035 from the non-Roth savings to a Roth Brokerage and everything is ok?  LOL.  I guess it only matters that I transferred 'any' $1035 back into a Roth?    

I was reading something about a possible hold-back of 20% with an Indirect Rollover so I will make sure I move more than the $1035 from  Savings to the Roth brokerage!  

Thanks again!

[TrapLine]

What you are experiencing is enough to not do small CDs. A hassle for sure. As to a 50 minute hold ... that is for the birds!

[JoeRockhead]

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@ptatohed wrote:

Ok, thanks guys.  I'll see if I can get through to Wealth Management and move the Roth CD to the Roth brokerage directly. 

If not, I guess an "Indirect Rollover" it is.  Which I'm having a hard time wrapping my head around.  I cash out the Roth CD to a regular savings, the Roth $1035 obviously co-mingles with the other thousands in the non-Roth savings, then I move $1035 from the non-Roth savings to a Roth Brokerage and everything is ok?  LOL.  I guess it only matters that I transferred 'any' $1035 back into a Roth?    

I was reading something about a possible hold-back of 20% with an Indirect Rollover so I will make sure I move more than the $1035 from  Savings to the Roth brokerage!  

Thanks again!

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@ptatohed the mandatory 20% withholding you may have read about applies to distributions from employer retirement plans such as 401(k)s, not IRA distributions. 

An IRA distribution may have voluntary tax withholding depending on how it's processed, so if you end up doing an indirect rollover, just make sure the full distribution amount is redeposited into your Roth IRA within 60 days.

[bs1234]

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@JoeRockhead wrote:

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@ptatohed wrote:

Ok, thanks guys.  I'll see if I can get through to Wealth Management and move the Roth CD to the Roth brokerage directly. 

If not, I guess an "Indirect Rollover" it is.  Which I'm having a hard time wrapping my head around.  I cash out the Roth CD to a regular savings, the Roth $1035 obviously co-mingles with the other thousands in the non-Roth savings, then I move $1035 from the non-Roth savings to a Roth Brokerage and everything is ok?  LOL.  I guess it only matters that I transferred 'any' $1035 back into a Roth?    

I was reading something about a possible hold-back of 20% with an Indirect Rollover so I will make sure I move more than the $1035 from  Savings to the Roth brokerage!  

Thanks again!

---

@ptatohed the mandatory 20% withholding you may have read about applies to distributions from employer retirement plans such as 401(k)s, not IRA distributions. 

An IRA distribution may have voluntary tax withholding depending on how it's processed, so if you end up doing an indirect rollover, just make sure the full distribution amount is redeposited into your Roth IRA within 60 days.

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Right, and it's because of the above that it's probably worth enduring another long phone wait to see if Wealth Management can do a direct rollover  (I was told by the non-wealth management part that US Bank only offers CDs in IRAs, so they basically know nothing).

While Roth IRAs will have less tax implications than traditional, they are still considerations is you are under 59.5, if your oldest roth (not just this one) is less than 5 years old etc, which can oll be avoided by a direct rollover.   And possibly by an indrect one as well but you might need more documentation at tax time.

I'm with the not-worth-it-for-small-CDs viewpoint here.   But I guess we do what we need to keep Smartly v1 going!

[ptatohed]

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@bs1234 wrote:

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@JoeRockhead wrote:

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@ptatohed wrote:

Ok, thanks guys.  I'll see if I can get through to Wealth Management and move the Roth CD to the Roth brokerage directly. 

If not, I guess an "Indirect Rollover" it is.  Which I'm having a hard time wrapping my head around.  I cash out the Roth CD to a regular savings, the Roth $1035 obviously co-mingles with the other thousands in the non-Roth savings, then I move $1035 from the non-Roth savings to a Roth Brokerage and everything is ok?  LOL.  I guess it only matters that I transferred 'any' $1035 back into a Roth?    

I was reading something about a possible hold-back of 20% with an Indirect Rollover so I will make sure I move more than the $1035 from  Savings to the Roth brokerage!  

Thanks again!

---

@ptatohed the mandatory 20% withholding you may have read about applies to distributions from employer retirement plans such as 401(k)s, not IRA distributions. 

An IRA distribution may have voluntary tax withholding depending on how it's processed, so if you end up doing an indirect rollover, just make sure the full distribution amount is redeposited into your Roth IRA within 60 days.

---

Right, and it's because of the above that it's probably worth enduring another long phone wait to see if Wealth Management can do a direct rollover  (I was told by the non-wealth management part that US Bank only offers CDs in IRAs, so they basically know nothing).

While Roth IRAs will have less tax implications than traditional, they are still considerations is you are under 59.5, if your oldest roth (not just this one) is less than 5 years old etc, which can oll be avoided by a direct rollover.   And possibly by an indrect one as well but you might need more documentation at tax time.

I'm with the not-worth-it-for-small-CDs viewpoint here.   But I guess we do what we need to keep Smartly v1 going!

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I hear you.  I actually didn't want this lame $1000 Roth CD at 3.X%.  I 'thought' that it was a quick way to open a Roth account with USB but it wasn't what I thought, I still had to open a separate Roth IRA brokerage which was what I really wanted.  I do now have the Roth IRA self-directed brokerage open and, for the last 2 years, I have maxed it out annually and it's doing quite well.  I could have opened a Roth anywhere, right?  But the thought was if my initial $100,000 ($50k self-directed and $50k robo-invested) that I put into USB for the 4% Smartly Visa dropped below $100,000, the Roth at USB could be a buffer to keep getting 4%.  Today the $100k is worth $125k (no additional contributions (and this was after it dropped to $90k in April '25)) and the Roth IRA is worth $15k (with contributions).  And for whatever reason, my Smartly Savings is above the highest advertised rate of 3.5% at 4.0% so I have some money in there too.