Q&A: Early withdrawal penalties on CDs

Dear Liz: You told a reader to be suspicious of a bank’s offer to waive early withdrawal penalties on a certificate of deposit. But several credit unions allow early withdrawals from five-year CDs after the account holder turns 59 1/2. These credit unions will even allow you to get higher-interest CDs at other credit unions with no penalty after 59 1/2 . My husband and I and sister did this for many years until just a few years ago. I even do Roth conversions every year and take money from five-year CDs with no penalty and go to the place with the highest interest rate. There are many rewards and unexpected privileges at credit unions. When my husband passed and I disclaimed his traditional IRAs, the children were allowed to keep the 6% interest on those CDs until they matured, even after they were changed to inherited IRAs.

Answer: Credit unions, which are owned by their members, often have better rates and terms than banks, although some banks also offer to waive early withdrawal penalties after 591/2 on certain CDs.

But no one should rely on a verbal assurance that a fee will be waived. The offer to waive the fee should be in writing and kept with other financial documentation.

Related Posts

  • Q&A: Parking money for a short term Dear Liz: We will soon be selling our home and moving into an apartment until we purchase a new home. Our proceeds from the sale will be […]
  • Q&A: Hard to predict tax rates Dear Liz: I read your column answer to the 40-year-old who asked about regular 401(k) versus Roth 401(k) contributions. Obviously, the […]
  • Q&A: IRA interest rate terms Dear Liz: I went to renew my IRA certificate of deposit and the bank officer suggested that I renew at the greater rate being offered for […]
  • Tuesday’s need-to-know money news Today's top story: What to do if you've been blacklisted by ChexSystems. Also in the news: How to avoid early withdrawal fees for CDs, […]