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Home >> Accounts >> Certificates of Deposit
Early Withdrawal Penalty on CD
Is there a banking regulation, or an IRS rule, that prohibits an early withdrawal penalty on an IRA CD of a 75-year-old depositor? I do not speak of RMD, but of withdrawal of amounts beyond that, even to the entire principal and accrued interest. If the bank requires $500 or some other insignificant balance be maintained until maturity, that is not a "Deal Breaker."
For example: $100,000 IRA CD with 36 month term. In 25th month, 75-year-old depositor needs, or wants, entire balance. Does depositor have to explain or justify reason for total withdrawal, in order for penalty to be waived? In these difficult economic times we must separate "Bank Choice" from "Bank is Required to." It is so important to us, before choosing a term.
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 There is no rule that would require a bank to allow an early withdrawal from a CD, with or without a penalty, even if the CD is part of an IRA. Most banks are more liberal in their early withdrawal restrictions for IRA customers who are older than 59-1/2.
The bank's early withdrawal penalty should be spelled out in detail in your deposit contract. You can make negotiation of a penalty provision that's acceptable to you as part of the deal. Nothing says that a bank can't soften its contract language to get your deposit.
Published on BankingQuestions.com 11/05/08
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