If I Move My 403b Into A Certificate Of Deposit (CD), Will There Be Any Charges Or Penalties?

Shawn Plummer

CEO, The Annuity Expert

Understanding 403b and Certificate of Deposit

To understand if there will be any charges or penalties when moving your 403b into a CD, it’s essential to understand what these accounts are and how they work.

What is a 403b?

A 403b is a retirement savings account for employees of non-profit organizations, schools, and specific government organizations. It allows you to save for retirement on a tax-deferred basis, meaning you don’t pay taxes on the money you contribute until you withdraw it in retirement.

Helpful Tool: 403b contribution calculator

What Is A 403B

What is a Certificate of Deposit (CD)?

A Certificate of Deposit (CD) is a type of savings account that typically offers a higher interest rate than a traditional one. When you open a CD, you agree to leave your money in the account for a specified period, known as the term. In exchange for leaving your money in the account, you earn interest on your funds.

The Best Rates To Grow Your Money

TermInsurance CompanyAPY
N/AMoney Market Account – Generations Bank5.29%
N/AMoney Market Account – American First Credit Union5.30%
N/ASavings Account – Customers Bank5.30%
12 MonthsCD – Bread Savings5.35%
5 YearsAnnuity – Wichita National6.30%
*Fixed annuities are only for saving money to use in retirement.

Disclaimer: This is a review. The Annuity Expert is not associated with a bank or credit union. However, fixed annuities are sold at most financial institutions. We aim to help you find the highest interest rates for your retirement savings. We may receive a small referral fee if you purchase something using a link in this guide.

Find And Compare The Highest Interest Rates

Find the highest interest rates for your savings, ranging from 3 months to 5 years, all in one place.

Charges and Penalties for Moving 403b Funds into a CD

Now that we’ve covered the basics of these two types of accounts let’s explore whether moving your 403b funds into a CD will result in any charges or penalties.

Charges for Moving 403b Funds into a CD

In most cases, there are charges for moving your 403b funds into a traditional CD. However, a rollover to an IRA CD or annuity would not inflict any charges. Nevertheless, it’s essential to check with your 403b plan administrator to confirm if there are any fees or charges associated with making this type of transaction.

Penalties for Moving 403b Funds into a CD

If you withdraw money from your 403b account before the age of 59 1/2, you may be subject to a 10% early withdrawal penalty. However, if you’re moving your funds into an IRA CD, you’re not technically withdrawing the money so this penalty wouldn’t apply. That being said, it’s essential to make sure you understand the terms and conditions of your 403b plan before making any changes.

Related Reading: Can I Roll a 403(b) into an IRA Without Penalty?

Factors to Consider When Moving 403b Funds into a CD

While there may not be charges or penalties associated with moving your 403b funds into a CD, there are some essential factors to consider before making this decision.

CD Term Length

When you open a CD, you agree to leave your money in the account for a specified period, known as the term. CD terms can range from a few months to several years, and typically the longer the term, the higher the interest rate. Therefore, it’s essential to consider how long you’re willing to leave your money in a CD and choose a term that makes sense for your financial goals.

CD Interest Rates

As mentioned earlier, one of the benefits of a CD is that it typically offers a higher interest rate than a traditional savings account. However, interest rates can vary widely depending on the institution and the length of the CD term. Therefore, shopping around and comparing interest rates from different banks and credit unions is essential to find the best CD for your needs.

Next Steps

Moving your 403b funds into a CD may be competent, especially if you’re looking for a low-risk investment with a higher interest rate than a traditional savings account. And while there may not be charges or penalties associated with making this type of transaction, it’s essential to understand the terms and conditions of your 403b plan and to carefully consider factors such as CD term length and interest rates before making any decisions. Remember, it’s always a good idea to consult a financial advisor before significantly changing your retirement savings plan.

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Frequently Asked Questions

What is a 403b retirement plan?

A tax-deferred retirement plan for non-profits.

Can a 403b be moved into a certificate of deposit (CD)?

Yes, transferring funds from a 403b retirement plan into a certificate of deposit (CD) is possible. However, it’s essential to consider any potential charges or penalties and weigh the benefits of a CD compared to other investment options.

Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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