When you hold a CD within a traditional IRA, you have two sets of withdrawal rules to think about. Early withdrawal from a CD can bring about a penalty of anywhere from three to 24 months' interest. Taking money from a traditional IRA before age 59 1/2 means paying a 10-percent penalty on top of ordinary income tax on the distribution. So, when you plan to transfer IRA CDs from a bank to a credit union, wait for the CDs to mature and then request a direct, or trustee-to-trustee, transfer to avoid taxes and penalties altogether.
Open an IRA with the credit union. Depending on the institution, you may be able to download and print account opening forms to complete, or you may be able to fill out a form online. You can also pick up a form by appearing in person at the credit union or have one mailed. Type or print your name and contact information, as well as your Social Security number and birth date. Put down the names and Social Security numbers of your beneficiaries. Let the credit union know, by indicating on the form, which of its CD products you want to invest in.
Tell the credit union you're planning to transfer IRA CD assets. If the credit union has a form for receiving IRA asset transfers, you can pick it up, download it or fill it out online. Type on the form the name of the bank from which the IRA CD assets are going to be transferred and the amount of the transfer.
Tell the bank that you want to do a direct transfer of the CD assets to the credit union when the CDs mature. Most likely, you will have to put the transfer instructions in writing, typically using a form provided by the bank. Let the bank know -- on the form -- whether you want to transfer all the IRA CDs or just a selection. Give the bank the name of the credit union and the number of the IRA to which you want to transfer the CD assets.
Check with both institutions to confirm that the transfer has taken place. Mistakes do happen. Confirming that the transaction is complete is good practice.
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