bank rates

The Best IRA CD Rate-Lock Policies

roll of cash emerging from broken golden eggI’ve recently been revisiting the fine points of IRA CDs.

I do this whenever I have one about to mature.

A recurring issue is exactly when I can lock in a rate on a replacement IRA CD at another institution.

Moving funds from an IRA CD maturing at one institution to a new IRA CD at another can be a real chore, requiring substantial lead time.

If the new CD issuer won’t guarantee your rate until it actually gets the IRA funds from the old institution (perhaps several weeks after you start the process), you may be in for a nasty surprise.

So, I’ve surveyed the lock-in policies of a handful of banks and credit unions currently offering relatively favorable 5-year IRA CD rates.

(I didn’t include GE Capital Retail Bank because that’s where I have my next maturing IRA CD.)

The results:

Ally Bank has the most customer-friendly rate-lock policy, guaranteeing (in writing) the higher of the rate posted for the new IRA CD on the date it’s opened and the rate posted on the date Ally receives the funds, provided the funds are received within 90 days of opening.

CIT Bank’s policy (unwritten) is to hold the rate for 60 days after a customer opens an IRA CD over the phone, pending arrival of the documentation and the transferred funds.

Both Nationwide Bank and EverBank informally promise that, once they receive all of the depositor’s account-opening paperwork, they will lock in the then-current rate for 30 days to obtain the funds from the old institution.

State Farm Bank says it will hold the posted rate on the date an IRA CD is opened over the phone, if the customer gets the required documents to State Farm within 10 days and if the funds are already available for transfer from the old institution.

Pentagon Federal Credit Union, Melrose Credit Union and Salem Five Bank refuse to commit to lock-ins.

PenFed and Melrose require the receipt of funds to establish the new CD’s rate. Salem Five has the same policy but tells me it may offer some leeway – two weeks, for example – in appropriate circumstances.

Because, with the exception of Ally, these lock-in policies are informal and/or unwritten – and some a bit opaque – you should always check with the new bank or credit union before spending a lot of time on documentation.

I wish IRA CD investing could be simpler, but it’s not.

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