Maturing IRA - What are my options?

Jandrews · 10-27-2007, 07:28 PM

Hello,

I periodically am asked for financial guidance by my elderly mother in law. She mentioned today that she has an IRA maturing on Nov 6th. She said that she doesn't need the money now, and doesn't want to pay taxes on it, but also doesn't want to renew it for another 30 months. What are her options? Can she renew for 12 months? If so, I assume the rate would be less, right?

Any information would be appreciated.

Thanks,

JA

Hugh R · 10-27-2007, 07:33 PM

An IRA meaning individual retirement account? They don't mature, does she mean a bond or a CD within an IRA? If so, look at 30, 60, 90 or 180 day CDs. Longer term doesn't always mean higher return.

Jandrews · 10-27-2007, 07:45 PM

Thanks Hugh,

Must be an IRA CD. How do I renew for a new term and avoid taxes?

JA

Hugh R · 10-27-2007, 08:01 PM

If its a CD, inside an IRA, simply find another financial vehicle within the IRA and purchase it. You, or your MIL should be able to go to the agent for the IRA, Bank, brokerage house, online,whatever and review other options. As long as you don't take money out of an IRA, you don't pay taxes. How old are you, if you don't mind me asking. YOU should have an IRA and be putting money into it yourself.

Jandrews · 10-27-2007, 08:28 PM

Thanks Hugh. I'm 43, and I have both IRA's and 401k. I have a CFP managing my portfolio, so I don't have a lot of experience purchasing instraments directly.

Thanks for your advice. I will look to see what other vehicles he institution has available and compare rates/terms. Will report back here if I have more questions.

Thanks again,

JA

Hugh R · 10-27-2007, 08:35 PM

Sorry, didn't mean to insult you, if I did. I guess my thought was that you should know about buying inside or outside of an IRA.

pwd72s · 10-27-2007, 09:20 PM

Age could be a factor here...not sure of the percentage one must take, but at age 70 1/2, you MUST take some from your IRA...

widgeon13 · 10-28-2007, 03:06 AM

Fidelity has a cash reserve fund fund (FDRXX) that yields 5.01 % (better than most 1 year CD's) and has no term so it's a nice place to hold cash on a short term basis. It can be held in an IRA as well and the cash is readily available.

At 70 1/2 you are required to take a minimum distribution from your IRA based on life expectancy (actuarial charts) and the age of your spouse if you are married.

I have a CFP but I also pay close attention to what they are doing since some have been known to follow unscrupulous practices at times. But then again, I'm retired so I have time to do this and managing my finances is critical to a long and comfortable retirement. When I retired, I took a lump sum rather than defined benefit plan, didn't trust the SOB at the company and didn't want to end up having them go belly up and turn it over to the PBGC to manage and end up with 20% of my benefits and living out of a shopping cart.

Jandrews · 10-28-2007, 07:15 AM

Very helpful...thanks guys. I assume I can find the actuarial charts online somewhere...I'll check that out. She is 75, so she would definitely need to be taking some distribution it sounds like.

I really don't have any insight into her total financial picture...she just asks me these one-off questions which makes it difficult to know what is going on in her total portfolio.

Thanks again,

JA

widgeon13 · 10-28-2007, 07:36 AM

Most of the financial websites have IRA distribution calculators. Go to Fidelity, Vanguard, T. Rowe Price and Bloomberg.com and you should be able to find it there. All you have to do in most cases is to enter the age and it will give the % that needs to be distributed for that year. She should be getting distributions already and if for some reason she isn't she needs to check into that soon.