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IRA CD ladder smoothes retirement bumps

Don Taylorq_v2.gifDear Dr. Don,
I have an IRA CD in the six-figure range. It will mature early next year. I withdraw the required minimum each year. How is it possible to rollover/renew this IRA CD using the CD ladder procedure?
-- Joel Jury-Rig

a_v2.gifDear Sender,
Breaking the single maturity CD into multiple CDs is easy enough. The required minimum distribution is based on the monies held in all of your IRA accounts, so breaking up the single deposit into multiple deposits isn't a big deal.

With multiple traditional IRAs, you can calculate each IRA's required minimum distribution, total the sum of these RMDs, and withdraw the total from one traditional IRA. You could structure a CD ladder so the shortest maturity comes due in time to make your next RMD.

The U.S. government is not requiring required minimum distributions for the 2009 tax year.

Alternately, many IRA CD accounts allow you to liquidate an amount equal to the RMD each year without an early withdrawal penalty. Work with your tax professional if you're uncertain about the required minimum distribution.

You can learn more about putting a CD ladder together by reading the Bankrate feature, "CD ladder evens out rate cycles." The feature includes a link to Bankrate's "CD Laddering Calculator."

Read more Dr. Don columns for additional personal finance advice.

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1 Year CD 0.90%  0.02 0.88%
2 Year CD 1.02%  0.01 1.03%
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