Dear Dr. Don,
I have liquidated some of the money I had in IRA mutual funds and would like to put it in a CD. I notice that IRA CDs offer a much lower rate of interest than regular CDs.

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Should I pay the taxes and start a regular CD account, or put my money in a low-interest CD and keep it as an IRA?
-- Howie Hampered

Dear Howie,
I don't think you should take the tax hit just to pick up the additional yield on a regular CD. I used Bankrate's "CDs & Investments: Compare Rates" feature to put together the following table.

Comparing CD rates

As you can see, it's a mixed bag as to which type of CD yields more in the high-yield market.

To satisfy my curiosity, I took a look at rates on the two types of CDs in my home market using Bankrate's "Compare IRA CD/Savings Rates." That table is below. As you can see, there's no difference between the yields on the two types of accounts.

CD rates in Dr. Don's market

So, I'm saying you need to shop around for your IRA CD provider -- don't accept that the IRA CD has to earn a substantially lower yield. Protect the tax deferral on this account by keeping it as an IRA account.

See my advice to Raymond Retirement about doing a trustee-to-trustee transfer or a rollover of your existing IRA account.

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