Penfed IRA CD partial withdrawal penaties

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Penfed IRA CD partial withdrawal penaties

Postby learning_head » Mon Dec 23, 2013 3:16 pm

Has anyone had experience withdrawing money from non-matured Penfed IRA CD after age 60, in the amount more than RMD (or at least more than RMD based on IRA funds that Penfed knows about)?

I just talked to a CSR who implied that unless distribution is in the RMD amount (and it was not clear if they would require some verification of that), then 1-year of penalties would be charged. I'd like to know if someone had real experience withdrawing part of IRA CD in amount greater than RMD and what that experience was like.

(Penfed IRA withdrawal form has "Normal Distribution" option but CSR said this was for RMD really, not just arbitrary distribution.)
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Re: Penfed IRA CD partial withdrawal penaties

Postby john94549 » Mon Dec 23, 2013 3:25 pm

If one is over 59 1/2, there is absolutely no early withdrawal penalty for a "partial withdrawal" from a PenFed IRA CD. Partial withdrawal is defined as any amount which does not bring the amount remaining on the CD to less than that required to open, generally $1000. Now, if you want to withdraw it all, that's different. And not a good idea.

Example: One has a $100,000 IRA CD. At PenFed. One makes a $99,000 "partial withdrawal". No early withdrawal penalty. One chooses to "cash in" the entire IRA CD, yup, you guessed it. Stand by for an EWP.
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Re: Penfed IRA CD partial withdrawal penaties

Postby learning_head » Mon Dec 23, 2013 3:29 pm

Thanks john94549, this was my understanding as well from reading online info but their CSR seemed to contradict this, as I even gave her example of 100k CD with 50k withdrawal, to which she replied they would need to know the reason for such large withdrawal, whether it's for medical purposes or some other example she listed (which did not make sense to me).

So, I wonder if someone has first-hand experience actually doing such partial withdrawals and how they handled it.
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Re: Penfed IRA CD partial withdrawal penaties

Postby Engineer » Mon Dec 23, 2013 3:33 pm

Earlier this month I took six figure withdrawals from two different 2% 7 year IRA CDs (one for my wife and the other for myself) and reinvested the proceeds in two new 3% 7 year IRA CDs. I called ahead to confirm the amount I could withdraw prior to proceeding. The amount taken in both cases was the total value in the account less 1000 dollars that had to remain to avoid closing the account and paying early withdrawal penalties.

One transaction took one day. The other transaction took two weeks due to a paperwork screwup on Penfed's end. They backdated the effective date to the original transaction date to correct the error.

My experience indicated you get different stories on the terms and conditions for this type of withdrawal depending on who you talk to.

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Re: Penfed IRA CD partial withdrawal penaties

Postby john94549 » Mon Dec 23, 2013 3:36 pm

learning_head wrote:Thanks john94549, this was my understanding as well from reading online info but their CSR seemed to contradict this, as I even gave her example of 100k CD with 50k withdrawal, to which she replied they would need to know the reason for such large withdrawal, whether it's for medical purposes or some other example she listed (which did not make sense to me).

So, I wonder if someone has first-hand experience actually doing such partial withdrawals and how they handled it.


I have done partials with StateFarmBank, no problems at all. Their policies for the "over 59 1/2 crowd" are identical to PenFed's. That said, you may have gotten a dunderhead CSR at PenFed. Ask to be connected to the IRA department. Trust me, they know the fine print. If they don't, look it up yourself, and read it to them. It's in the IRA disclosure, which I have posted here many times.
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Re: Penfed IRA CD partial withdrawal penaties

Postby HueyLD » Mon Dec 23, 2013 3:39 pm

On page 18 of PedFed's IRA Account Application Booklet, it says:

"(3) Exceptions. The penalties described above will not be applied if the withdrawal is made:
(i) Subsequent to the death of any holder of the Certificate.
(ii) As a result of the voluntary or involuntary liquidation of the credit union.
(iii) If the owner is permanently disabled, as defined in the Internal Revenue Code Section 72(m).
(iv) If the owner has reached age 59½ and takes a partial withdrawal."


You may need to point out this section to the customer service folks.
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Re: Penfed IRA CD partial withdrawal penaties

Postby john94549 » Mon Dec 23, 2013 3:41 pm

HueyLD wrote:On page 18 of PedFed's IRA Account Application Booklet, it says:

"(3) Exceptions. The penalties described above will not be applied if the withdrawal is made:
(i) Subsequent to the death of any holder of the Certificate.
(ii) As a result of the voluntary or involuntary liquidation of the credit union.
(iii) If the owner is permanently disabled, as defined in the Internal Revenue Code Section 72(m).
(iv) If the owner has reached age 59½ and takes a partial withdrawal."


You may need to point out this section to the customer service folks.


Exactly.
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Re: Penfed IRA CD partial withdrawal penaties

Postby VictoriaF » Mon Dec 23, 2013 3:47 pm

I have never used Penfed for IRA. How difficult is it to move Roth IRA funds from Vanguard to Penfed? I am thinking of getting some of these 5-year 3% CDs.

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Re: Penfed IRA CD partial withdrawal penaties

Postby learning_head » Mon Dec 23, 2013 3:49 pm

Thanks Engineer, in your case, it sounds like you kept the money all within IRA, right? So this was not considered a distribution then? How was this transaction classified on your forms (their form 735 specifically)?

This is a very good data point and sounds promising. I wonder if anyone also was able to withdraw funds from IRA to non-IRA account.

Victoria, if you can do arbitrary partial withdrawal (of all but $1k) for free, why bother with 5 years and not open their 7 year CD?

@HueyLD & john: Thanks. I did see that language as well but interestingly their form 735 does not even have a box for "partial" withdrawal, only "normal distribution", which CSR (admittedly who may not know enough) claimed was RMD only, not an arbitrary thing. I guess I got scared by CSR saying that they request the specific reason for such withdrawals - why would the CSR even come up with this?
Last edited by learning_head on Mon Dec 23, 2013 3:54 pm, edited 2 times in total.
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Re: Penfed IRA CD partial withdrawal penaties

Postby HueyLD » Mon Dec 23, 2013 3:53 pm

VictoriaF wrote:I have never used Penfed for IRA. How difficult is it to move Roth IRA funds from Vanguard to Penfed?

Victoria,

You need to download the IRA new account booklet (total of 24 pages) and fill out the applicable sections for direct transfers. PenFed will contact Vanguard on your behalf after you submit the form(s).
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Re: Penfed IRA CD partial withdrawal penaties

Postby VictoriaF » Mon Dec 23, 2013 3:54 pm

learning_head wrote:Victoria, if you can do partial withdrawal (of all but $1k) for free, why bother with 5 years and not open 10 years?


Currently, Penfed offers 3% CDs only for 5 years and 7 years. I might get 7-year CDs, but I don't think it's likely that 3% will be considered a great rate for seven years.

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Re: Penfed IRA CD partial withdrawal penaties

Postby VictoriaF » Mon Dec 23, 2013 3:56 pm

HueyLD wrote:
VictoriaF wrote:I have never used Penfed for IRA. How difficult is it to move Roth IRA funds from Vanguard to Penfed?

Victoria,

You need to download the IRA new account booklet (total of 24 pages) and fill out the applicable sections for direct transfers. PenFed will contact Vanguard on your behalf after you submit the form(s).


HueyLD,

Just to clarify, I need a new account for the IRA, even if I already have several other accounts with Penfed? And it will work with a Roth IRA?

Thank you!

Victoria
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Re: Penfed IRA CD partial withdrawal penaties

Postby learning_head » Mon Dec 23, 2013 3:56 pm

VictoriaF wrote:
learning_head wrote:Victoria, if you can do partial withdrawal (of all but $1k) for free, why bother with 5 years and not open 10 years?


Currently, Penfed offers 3% CDs only for 5 years and 7 years. I might get 7-year CDs, but I don't think it's likely that 3% will be considered a great rate for seven years.

Victoria


Right, I meant to say 7 years, sorry. While probability of 3% being good in 5 years can be considered low (who knows), if it's effectively a free insurance against such event, why not take that free lunch?
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Re: Penfed IRA CD partial withdrawal penaties

Postby HueyLD » Mon Dec 23, 2013 3:59 pm

VictoriaF wrote:Just to clarify, I need a new account for the IRA, even if I already have several other accounts with Penfed? And it will work with a Roth IRA?

You don't have any IRA account at PenFed, right?

If you don't have one, you need to open one for T-IRA or R-IRA. Taxable accounts and retirement accounts don't mix. In addition, T-IRA and R-IRA accounts also don't mix.
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Re: Penfed IRA CD partial withdrawal penaties

Postby VictoriaF » Mon Dec 23, 2013 3:59 pm

learning_head wrote:
VictoriaF wrote:
learning_head wrote:Victoria, if you can do partial withdrawal (of all but $1k) for free, why bother with 5 years and not open 10 years?


Currently, Penfed offers 3% CDs only for 5 years and 7 years. I might get 7-year CDs, but I don't think it's likely that 3% will be considered a great rate for seven years.

Victoria


Right, I meant to say 7 years, sorry. While probability of 3% being good in 5 years can be considered low (who knows), if it's effectively a free insurance against such event, why not take that free lunch?


learning_head,

Your thread has just helped me to take an action. Thanks!

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Re: Penfed IRA CD partial withdrawal penaties

Postby VictoriaF » Mon Dec 23, 2013 4:00 pm

HueyLD wrote:
VictoriaF wrote:Just to clarify, I need a new account for the IRA, even if I already have several other accounts with Penfed? And it will work with a Roth IRA?

You don't have any IRA account at PenFed, right?

If you don't have one, you need to open one for T-IRA or R-IRA. Taxable accounts and retirement accounts don't mix.


Right. I have taxable accounts at Penfed, but not an IRA. Now, I will also have an IRA. Thanks again!

Victoria
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Re: Penfed IRA CD partial withdrawal penaties

Postby john94549 » Mon Dec 23, 2013 4:02 pm

Victoria, every time you open a new IRA CD with PenFed, it's like you're starting from scratch. Been there, done that. Just humor them. Fill out all the forms, tell them everything you've told them before. They're quite analog.
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Re: Penfed IRA CD partial withdrawal penaties

Postby VictoriaF » Mon Dec 23, 2013 4:04 pm

john94549 wrote:Victoria, every time you open a new IRA CD with PenFed, it's like you're starting from scratch. Been there, done that. Just humor them. Fill out all the forms, tell them everything you've told them before. They're quite analog.


I will be happy to humor them, for as long as I could keep some left-over humor for myself. Otherwise, I'll have to withdraw my humor even before the age of 59.5.

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Re: Penfed IRA CD partial withdrawal penaties

Postby john94549 » Mon Dec 23, 2013 4:12 pm

Victoria, we all have "too funny" PenFed stories; eventually, we get over it. The rates make up for the call center. And, after all, you can always ask to be transferred to the IRA Department. Unless you are mistakenly transferred to another building in Alexandria, Virginia, you will generally get the right answer.

Is the NSA in Alexandria?
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Re: Penfed IRA CD partial withdrawal penaties

Postby VictoriaF » Mon Dec 23, 2013 4:13 pm

john94549 wrote:Is the NSA in Alexandria?


They are in Fort Meade, MD.

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Re: Penfed IRA CD partial withdrawal penaties

Postby john94549 » Mon Dec 23, 2013 4:19 pm

Victoria, that's a relief. I always wondered.
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Re: Penfed IRA CD partial withdrawal penaties

Postby VictoriaF » Mon Dec 23, 2013 4:29 pm

john94549 wrote:Victoria, that's a relief. I always wondered.


I would have asked you how is this a relief, but I don't want to get too far off-topic, especially because the OP was so nice to me.

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Re: Penfed IRA CD partial withdrawal penaties

Postby john94549 » Mon Dec 23, 2013 4:35 pm

VictoriaF wrote:
john94549 wrote:Victoria, that's a relief. I always wondered.


I would have asked you how is this a relief, but I don't want to get too far off-topic, especially because the OP was so nice to me.

Victoria
Mind you, I always wondered if PenFed was merely the NSA, scooping up our money.
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Re: Penfed IRA CD partial withdrawal penaties

Postby VictoriaF » Mon Dec 23, 2013 4:45 pm

john94549 wrote:
VictoriaF wrote:
john94549 wrote:Victoria, that's a relief. I always wondered.


I would have asked you how is this a relief, but I don't want to get too far off-topic, especially because the OP was so nice to me.

Victoria
Mind you, I always wondered if PenFed was merely the NSA, scooping up our money.


They are governed by different Titles of the United States Code. Military ("Pentagon") is Title 10, Intelligence is Title 50.

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IMPORTANT INFO re: Penfed's IRA certificate policy

Postby protagonist » Wed Jan 01, 2014 12:33 pm

[Thread merged into here --admin LadyGeek]

It was brought to my attention that some here have been informed that, if over 59 1/2 y.o. , they can open a Penfed IRA certificate without an EWP (Early Withdrawal Penalty).

I fear they were misinformed.

This from their "Details and Disclosures" re: Penfed IRA certificates:

"*Note that any IRA Certificates opened or renewed prior to September 1, 2007, can be redeemed before maturity without a penalty, if the Member is at least 59 1/2 years old. A penalty will be imposed for early redemption of an IRA Certificate that was opened or renewed after September 1, 2007, regardless of the member's age. This fee could reduce your earnings."

https://www.penfed.org/Traditional-IRA-Certificates
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby Carl53 » Wed Jan 01, 2014 12:45 pm

"Partial withdrawals from IRA certificate or qualified distributions without an early redemption penalty "

Quoted from your link. Elsewhere it is stated that as long as $1000 remains - no penalty.

Happy New Year
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby protagonist » Wed Jan 01, 2014 12:54 pm

Happy new year to you, Carl!

Ah, so "partial withdrawals" are not considered "redemptions" ?

Perhaps I misunderstood and spoke too quickly.... I didn't want anybody to get hurt. Sorry if I got it wrong.

Still, it seems too good to be true which leaves me wondering. Hopefully anybody considering this option will confirm all the details prior to purchase.
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby sscritic » Wed Jan 01, 2014 12:55 pm

protagonist wrote: Hopefully anybody considering this option will confirm all the details prior to purchase.

And before withdrawal. Or is that redemption?
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby VictoriaF » Wed Jan 01, 2014 1:05 pm

Carl53 wrote:"Partial withdrawals from IRA certificate or qualified distributions without an early redemption penalty "

Quoted from your link. Elsewhere it is stated that as long as $1000 remains - no penalty.

Happy New Year


I found this information on the Penfed's website about the benefits of IRA Certificates:

Penfed wrote:Make partial withdrawals for qualified distributions from IRA certificates without an early redemption penalty**

...

**Note that any IRA Certificates opened or renewed prior to September 1, 2007, can be redeemed before maturity without a penalty, if the Member is at least 59 1/2 years old. A penalty will be imposed for early redemption of an IRA Certificate that was opened or renewed after September 1, 2007, regardless of the member's age. This fee could reduce your earnings. Partial withdrawls for members over the age 59 1/2 (including Required Minimum Distributions) and qualified distributions regardless of age (including Disability) may be processed from IRA certificates without incurring an early redemption penalty.


Are there other links defining "partial withdrawals"? If someone is taking RMDs after the age of 70, it's clear. It's also clear for those taking qualified disability distributions. Whether one can withdraw at will (down to $1k) between the ages of 59.5 and 70 is less clear.

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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby tfb » Wed Jan 01, 2014 1:23 pm

VictoriaF wrote:It seems that "partial withdrawals for qualified distributions" are RMDs and only applicable after the age of 70.

If it's 70-1/2 they wouldn't mention 59-1/2. Distributions after 59-1/2 are qualified distributions (qualify for no 10% penalty). They also mention "including Required Minimum Distributions" which means there are qualified distributions outside RMDs.
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby Austintatious » Wed Jan 01, 2014 1:24 pm

VictoriaF wrote:
Carl53 wrote:"Partial withdrawals from IRA certificate or qualified distributions without an early redemption penalty "

Quoted from your link. Elsewhere it is stated that as long as $1000 remains - no penalty.

Happy New Year


From Penfed's website on the benefits of IRA Certificates:

Penfed wrote:Make partial withdrawals for qualified distributions from IRA certificates without an early redemption penalty**

...

**Note that any IRA Certificates opened or renewed prior to September 1, 2007, can be redeemed before maturity without a penalty, if the Member is at least 59 1/2 years old. A penalty will be imposed for early redemption of an IRA Certificate that was opened or renewed after September 1, 2007, regardless of the member's age. This fee could reduce your earnings. Partial withdrawls for members over the age 59 1/2 (including Required Minimum Distributions) and qualified distributions regardless of age (including Disability) may be processed from IRA certificates without incurring an early redemption penalty.


It seems that "partial withdrawals for qualified distributions" are RMDs and only applicable after the age of 70.

Victoria


Victoria, it looks to me like there's contradictory language on the PenFed website. As you point out, their language describing the benefits of IRA certificates is:

Make partial withdrawals for qualified distributions from IRA certificates without an early redemption penalty**

but as Carl53 points out, they also state:

Partial withdrawals from IRA certificate or qualified distributions without an early redemption penalty.

To me, the difference in those two underlined words is distinct and suggests quite different things. That could be trouble for PenFed, as well as for those who have been acting in reliance on the latter language.
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby sscritic » Wed Jan 01, 2014 1:29 pm

What's a missing f between friends? I read a passage from the CFR this morning where endorsed was written indorsed. It means the same thing, as does for and or with the missing f pronounced.
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby VictoriaF » Wed Jan 01, 2014 1:48 pm

Austintatious wrote:
VictoriaF wrote:
Carl53 wrote:"Partial withdrawals from IRA certificate or qualified distributions without an early redemption penalty "

Quoted from your link. Elsewhere it is stated that as long as $1000 remains - no penalty.

Happy New Year


From Penfed's website on the benefits of IRA Certificates:

Penfed wrote:Make partial withdrawals for qualified distributions from IRA certificates without an early redemption penalty**

...

**Note that any IRA Certificates opened or renewed prior to September 1, 2007, can be redeemed before maturity without a penalty, if the Member is at least 59 1/2 years old. A penalty will be imposed for early redemption of an IRA Certificate that was opened or renewed after September 1, 2007, regardless of the member's age. This fee could reduce your earnings. Partial withdrawls for members over the age 59 1/2 (including Required Minimum Distributions) and qualified distributions regardless of age (including Disability) may be processed from IRA certificates without incurring an early redemption penalty.


It seems that "partial withdrawals for qualified distributions" are RMDs and only applicable after the age of 70.

Victoria


Victoria, it looks to me like there's contradictory language on the PenFed website. As you point out, their language describing the benefits of IRA certificates is:

Make partial withdrawals for qualified distributions from IRA certificates without an early redemption penalty**

but as Carl53 points out, they also state:

Partial withdrawals from IRA certificate or qualified distributions without an early redemption penalty.

To me, the difference in those two underlined words is distinct and suggests quite different things. That could be trouble for PenFed, as well as for those who have been acting in reliance on the latter language.


Austintatious,

Thank you. You and tfb replied to an earlier version of my message, which I was editing while you were composing yours.

I agree with your distinction between:

"partial withdrawals for qualified distributions from IRA certificates..." in the main part of the web page

and

"Partial withdrawls for members over the age 59 1/2 (including Required Minimum Distributions) and qualified distributions..." in the footnote.

(My test is slightly different, it's directly cited from the Penfed's website about the benefits of IRA Certificates.)

The main part is more restrictive, the footnote is more liberal. The question is which one would Penfed enforce, if 3 years from now they face en masse partial withdrawals from these CDs.

Question to those who have already purchased these CDs:
Does the electronic documentation that came with the CDs address this issue? This is a very particular question related to the distinction between the "for" and "and" highlighted above.

Thank you,
Victoria
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby learning_head » Wed Jan 01, 2014 3:19 pm

Not sure if this helps but...

From PenFed’s IRA Application Booklet at https://www.penfed.org/Opening-an-IRA-Account/ (which is under https://www.penfed.org/Forms/ -> Deposit Accounts -> "IRA Account / ROTH IRA / Converting IRA to ROTH - Application Booklet"), see items (f-2) and (g-iv) mentioned below. You do NOT have to be a member to download about PDF booklet file - it's publicly available.

f. Withdrawals:
(1) Only you may request a withdrawal from your IRA certificates; beneficiaries have access to the account only upon your death. Funds are available for withdrawal on the business day following the maturity date. If the maturity date is a Sunday, funds will be available in two business days.
(2) Partial withdrawals may be made, subject to early withdrawal penalties as described in paragraph (g) below, providing the requested withdrawal amount does not reduce the original issue below a minimum of $1,000 for 1-, 2-, 3-, 4-, 5-, or 7-year IRA Certificates, in which case the funds will be transferred to the IRA Share account.
(3) The credit union reserves the right to require a written notice of up to 60 days of intention to withdraw funds from your IRA certificate(s).

g. Penalties. In the event of early withdrawal, the following penalties apply:
(1) Certificates with a term up to and including 4 years
(i) If redeemed within 180 days of the issue date or any renewal date, all dividends will be forfeited.
(ii) If redeemed thereafter, but prior to the maturity date, dividends for the most recent 180 days will be forfeited.
(2) Certificates with a term of 5 years or greater
(i) If redeemed within 365 days of the issue date or any renewal date, all dividends will be forfeited.
(ii) If redeemed thereafter, but prior to the maturity date, dividends for the most recent 365 days will be forfeited.
(3) Exceptions. The penalties described above will not be applied if the withdrawal is made:
(i) Subsequent to the death of any holder of the Certificate.
(ii) As a result of the voluntary or involuntary liquidation of the credit union.
(iii) If the owner is permanently disabled, as defined in the Internal Revenue Code Section 72(m).
(iv) If the owner has reached age 59½ and takes a partial withdrawal.


I guess my question is... in above it states "in which case the funds will be transferred to the IRA Share account"... but what if you want to withdraw money to outside of IRA completely? Or would it be like first making withdrawal to IRA share account and then from IRA share account to outside NON-IRA account is a non-issue?
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby protagonist » Wed Jan 01, 2014 4:00 pm

learning_head wrote:Not sure if this helps but...

From PenFed’s IRA Application Booklet at https://www.penfed.org/Opening-an-IRA-Account/ (which is under https://www.penfed.org/Forms/ -> Deposit Accounts -> "IRA Account / ROTH IRA / Converting IRA to ROTH - Application Booklet"), see items (f-2) and (g-iv) mentioned below. You do NOT have to be a member to download about PDF booklet file - it's publicly available.

f. Withdrawals:
(1) Only you may request a withdrawal from your IRA certificates; beneficiaries have access to the account only upon your death. Funds are available for withdrawal on the business day following the maturity date. If the maturity date is a Sunday, funds will be available in two business days.
(2) Partial withdrawals may be made, subject to early withdrawal penalties as described in paragraph (g) below, providing the requested withdrawal amount does not reduce the original issue below a minimum of $1,000 for 1-, 2-, 3-, 4-, 5-, or 7-year IRA Certificates, in which case the funds will be transferred to the IRA Share account.
(3) The credit union reserves the right to require a written notice of up to 60 days of intention to withdraw funds from your IRA certificate(s).

g. Penalties. In the event of early withdrawal, the following penalties apply:
(1) Certificates with a term up to and including 4 years
(i) If redeemed within 180 days of the issue date or any renewal date, all dividends will be forfeited.
(ii) If redeemed thereafter, but prior to the maturity date, dividends for the most recent 180 days will be forfeited.
(2) Certificates with a term of 5 years or greater
(i) If redeemed within 365 days of the issue date or any renewal date, all dividends will be forfeited.
(ii) If redeemed thereafter, but prior to the maturity date, dividends for the most recent 365 days will be forfeited.
(3) Exceptions. The penalties described above will not be applied if the withdrawal is made:
(i) Subsequent to the death of any holder of the Certificate.
(ii) As a result of the voluntary or involuntary liquidation of the credit union.
(iii) If the owner is permanently disabled, as defined in the Internal Revenue Code Section 72(m).
(iv) If the owner has reached age 59½ and takes a partial withdrawal.


I guess my question is... in above it states "in which case the funds will be transferred to the IRA Share account"... but what if you want to withdraw money to outside of IRA completely? Or would it be like first making withdrawal to IRA share account and then from IRA share account to outside NON-IRA account is a non-issue?


Or what about to another IRA account? So item 3 (iv), it seems, allows one over 59.5 y o to take a "partial withdrawal" penalty- free....but what is a "withdrawal"? Does it only pertain to money removed entirely from one's IRA (I think that may be called a "distribution", no?)? Or does it pertain as well to money transferred from a Penfed IRA certificate, to another IRA account, eg one at Vanguard or Fidelity (perhaps using their "IRA Share account" as an intermediary)?

It's just hard to imagine they would offer seniors an account guaranteeing 3% interest for 7 years that would essentially function as a bank account with unlimited withdrawals. Sounds too good to be true.
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby Austintatious » Wed Jan 01, 2014 4:25 pm

sscritic wrote:What's a missing f between friends? I read a passage from the CFR this morning where endorsed was written indorsed. It means the same thing, as does for and or with the missing f pronounced.


sscritic, I buy your proposition that "indorsed" was near certainly entended to be "endorsed" in the situation to which you refer,but your suggestion that "or" is to be construed as "for" in the context of the FedPen website is simply a stretch too far. In support thereof, I refer not to a passage from the Code of Federal Regulations but to the especially helpful 2:19 pm post of learning_head whereby he appears to have settled the issue by citing subsection g(3)(iv), which exempts partial withdrawals from penalty for owners having reached 59 and 1/2 of age, a permissible partial withdrawal appearing to be any amount of the certificate in excess of the $1,000 minimum, per subsection (f)(2).
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby john94549 » Wed Jan 01, 2014 4:35 pm

If it's an IRA CD, and you're over the age of 59 1/2, there's no penalty for a partial withdrawal. This is a major (and somewhat unknown) perk of PenFed. We oldsters know about this.

StateFarmBank has the same policy, but their CD rates aren't up to snuff.
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby lazyday » Wed Jan 01, 2014 9:35 pm

This looks like a great benefit, but I wonder if abused, Penfed would no longer accept new money from the abuser.

(Similar for extreme gaming of some IRS rules, especially if tax filing obviously different from those using rules as intended, maybe more likely to be audited. But that's other threads.)
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby VictoriaF » Wed Jan 01, 2014 9:43 pm

lazyday wrote:This looks like a great benefit, but I wonder if abused, Penfed would no longer accept new money from the abuser.

(Similar for extreme gaming of some IRS rules, especially if tax filing obviously different from those using rules as intended, maybe more likely to be audited. But that's other threads.)


I think a serious potential issue is not an abuse by an individual but en masse exodus if something much better becomes available. Let's say, Money Markets start paying 4%, as they did in not so distant past, and all current CD holders start pulling money out. Penfed may try to stop the bleeding by providing a suitable interpretation of ambiguous rules.

Victoria
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby john94549 » Wed Jan 01, 2014 9:48 pm

It's like a checking account paying 3.0%.
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby BrandonBogle » Wed Jan 01, 2014 10:28 pm

For my mother, who already had a PenFed 5-year and 7-year CD at 2% & 2.25%, respectively, we withdrew all but $1k + accrued interest (for that month) out of each CD into her IRA Share Account and opened a new 5-year 3.04% CD. There was $0 in penalties taken out.

The funds withdrawal took three days and the new CD took another week. Looking at the IRA Share online, it was backdated to the day after the withdrawal request.
PenFed wrote:12/19/2013 TRANSFER FROM IRA CERT
12/19/2013 TRANSFER FROM IRA CERT
12/26/2013 TRANSFER TO IRA CERT EFF:12/19/13
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby VictoriaF » Wed Jan 01, 2014 10:48 pm

BrandonBogle wrote:For my mother, who already had a PenFed 5-year and 7-year CD at 2% & 2.25%, respectively, we withdrew all but $1k + accrued interest (for that month) out of each CD into her IRA Share Account and opened a new 5-year 3.04% CD. There was $0 in penalties taken out.

The funds withdrawal took three days and the new CD took another week. Looking at the IRA Share online, it was backdated to the day after the withdrawal request.
PenFed wrote:12/19/2013 TRANSFER FROM IRA CERT
12/19/2013 TRANSFER FROM IRA CERT
12/26/2013 TRANSFER TO IRA CERT EFF:12/19/13


Thank you Brandon. May I ask if your mother is under the age of 70? For those over 70, distributions and withdrawals are easier as they can be justified by the RMDs.

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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby BrandonBogle » Wed Jan 01, 2014 11:33 pm

VictoriaF wrote:
Thank you Brandon. May I ask if your mother is under the age of 70? For those over 70, distributions and withdrawals are easier as they can be justified by the RMDs.

Victoria


Yes, mom is 63.
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby Kevin M » Thu Jan 02, 2014 1:40 am

BrandonBogle wrote:For my mother, who already had a PenFed 5-year and 7-year CD at 2% & 2.25%, respectively, we withdrew all but $1k + accrued interest (for that month) out of each CD into her IRA Share Account and opened a new 5-year 3.04% CD. There was $0 in penalties taken out.

Interesting. When I asked a PenFed rep (a few years ago) if I could do a partial early withdrawal and roll it into another PenFed CD (once I was older than 59.5) I was told no--I would have to actually take the money out of PenFed. I figured I could still do it as a rollover, but would be limited to doing so once per year. This sounds much better than that.

Could you tell us more about the process? Were you able to do it all by phone or online? PenFed requires a signed note to do an early redemption (acknowledging the EWP), but do they require it for this type of partial withdrawal with no penalty?

Thanks,

Kevin
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby protagonist » Thu Jan 02, 2014 11:58 am

Just spoke w Penfed rep:
- He confirmed that partial withdrawals work w/o penalty if over 59.5 y o, whether or not you transfer into another Penfed IRA vehicle or out of Penfed entirely, as long as you keep $1K in the CD.
- He claimed current rates are good through month of January
- He said application can be sent via email as long as they already have signature on file
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Re: Penfed IRA CD partial withdrawal penaties

Postby Engineer » Thu Jan 02, 2014 12:20 pm

Learning Head,

I sent you a PM in response to your question of 12/23/2013. However, not sure you opened it.

In summary:

I completed PenFed Form 735 which took the $$ from my original lower yielding 7 year PenFeD IRA CD and transferred it to my regular share account. This was considered a distribution. At the same time, I completed PenFed Form 734 to move the funds from the regular share account to a new 7 year IRA CD. This was a rollover transaction. Since I am over 59 1/2 there were no early withdrawal penalties.

Hope this answers your question.

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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby gadfly888 » Thu Jan 02, 2014 12:58 pm

Hello Brandon and others,

I just called penfed, for the second time, and was again told there is no way to transfer from an existing cd
to the IRA share account without a one yr. intrerest penalty. I explained that the info is out there that in fact
folks are doing this, and was emphatically told no. Any withdrawal or transfer, partial or otherwise, is considered
breaking the cd and is subject to either penfed one yr. interest penalty if left in the IRA, or penfed penalty plus
taxable event status if removed from IRA. The one yr. penfed interest penalty regards 5 and 7 yr. cds. I used
the exact Brandon Bogle example, and was told no way.

I would love to be corrected,

gad-
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby VictoriaF » Thu Jan 02, 2014 1:22 pm

gadfly888 wrote:Hello Brandon and others,

I just called penfed, for the second time, and was again told there is no way to transfer from an existing cd
to the IRA share account without a one yr. intrerest penalty.


gadfly888,

Thank you. Please clarify:
- Did you ask about a transfer from an existing non-IRA CD to an IRA CD or from an existing IRA CD to another IRA CD?
- Are you over 59.5 years of age?

gadfly888 wrote:I explained that the info is out there that in fact
folks are doing this, and was emphatically told no. Any withdrawal or transfer, partial or otherwise, is considered
breaking the cd and is subject to either penfed one yr. interest penalty if left in the IRA, or penfed penalty plus
taxable event status if removed from IRA. The one yr. penfed interest penalty regards 5 and 7 yr. cds. I used
the exact Brandon Bogle example, and was told no way.

I would love to be corrected,

gad-


In this thread we have cited from Penfed's website and the enrollment booklet. But after one buys CDs, I think Penfed sends a Prospectus.

Can anyone who's bought Penfed CDs in December quote for us what the Prospectus says about partial IRA withdrawals?
At the time of closing the CD the only authoritative source will be this Prospectus.

Thank you,

Victoria
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby BrandonBogle » Thu Jan 02, 2014 1:24 pm

Sorry to hear others had difficulties. In our case, we wrote a letter asking for the withdrawal to her IRA Share account; included an acknowledgement of EWP of 1 year; included the exact page, paragraph, section, etc. reference that the EWP would be waived for her partial withdrawal above age 59.5; included their own IRA withdrawal form with "Transfer to IRA" checked; included an IRA deposit voucher with the CD request; signed all copies and faxed it in. They called to confirm and the first CSR (a man) that called her said "it can't be done", to which we said "look at first page of the fax and look up that policy in your own form". They said they would call us back shortly and another CSR (a woman) called us back 30 minutes later and said everything would be processed but would take a few days.

We were prepared if we needed to to "direct" transfer these funds to Vanguard and transfer them back if we needed to, but fortunately did not have to do all that.
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Re: IMPORTANT INFO re: Penfed's IRA certificate policy

Postby BrandonBogle » Thu Jan 02, 2014 1:26 pm

Victoria, we have yet to receive anything in the mail for mom. They processed this on the day after Christmas, so it is probably still in the mail to us. For my IRA CDs (I'm 30), I only received two confirmation slips: 1) confirming transfer of money from WellsTrade Roth IRA to Penfed Roth IRA Share, 2) confirming opening of CD from Penfed Roth IRA Share to Penfed Roth IRA CD. No prospectus was received by me before I flew down to Florida on New Year's Eve. My personal IRA CDs were processed on 12/17.
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