Dear Senior Living Adviser,

Is there a penalty if I withdraw an individual retirement account certificate of deposit before maturity if I am 88 years old?

— Jenny Juncture

Dear Jenny,

Since you’re well past age 59 1/2, the early withdrawal penalty is one levied by the bank, not by the IRS. Banks sometimes don’t charge a penalty on required minimum distributions, or RMDs, out of an IRA CD. Bankrate’s CD Early Withdrawal Survey goes over the pros and cons of cashing in a CD early.

Beyond that, it depends on the bank’s policy concerning these accounts. Ask your banker whether there’s a penalty on an RMD and what the penalty would be if you cashed in your IRA CD. The bank may choose to waive the penalty, so it’s worth asking.

If you do have to pay a penalty, the penalty is considered forfeited interest income and generates an adjustment to gross income that will offset some of the interest earnings on your income taxes. The forfeited interest shows up on the Form 1099-INT that the bank provides to you. You have to file income taxes, using Form 1040 instead of Form 1040A to use this deduction.

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