Where should I put my money after withdrawing it from my IRA?
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Linda, 70, from Oak Forest asked about what to do with her retirement funds. She said:
“In October 2025, my IRA will be free of early withdrawal penalties. I had $50,000 in there for 10 years and only earned $13,000. I felt I was used by my financial adviser and do not want him to advise me of what to do with the money now. But I don’t know what I want to do with it. CD ladders? High interest savings account? I also see online names of banks I’ve never heard of. How do I tell if they’re legit?”
Early withdrawal penalties
Sarah Brady, personal finance writer and Sun-Times contributor, said if you're under 59 1/2 and you pull money out of a traditional individual retirement account, you can face an early withdrawal penalty. Typically, it's a 10% penalty tax.
Since Linda is 70, she's closer to the required minimum distribution milestone. For many types of retirement accounts, you're required to start taking distributions at 73.
"Even if you are in that safe window, where you're of the age where you can make a withdraw without penalties, you do still want to be aware that the withdraw can be taxable," Brady said.
Check with your financial adviser
Earning $13,000 in 10 years appears to be low, Brady said.
"You've been getting an average annual return that's just over 2%, which is indeed low," she said. "I'm going to go ahead and make a guess that your adviser has probably put your investments into really low risk assets. So your portfolio is probably built up with things like money market accounts, let's say, treasury bonds, CDs — investments that are really low risk."
She said if your return appears low, it could be worth talking with your adviser as well as asking about their fee structure.
"If you're concerned about misconduct, I would contact the firm and let them know," she said. "If you have issues with the firm in general, you might want to think about reaching out to FINRA at finra.org to file a complaint."
Deciding where to put the cash
If you're withdrawing retirement funds for day-to-day spending, it's best to deposit the cash into a checking account for quick access.
Brady said if you don't have emergency savings, she highly recommends putting at least three months worth of your regular expenses into a bank account with a high return, like a high yield savings account.
But let's say you want to save up money for a trip in six months or you won't need to spend it for a couple years. Then "low risk investments, where you are going to have a guaranteed rate of return" are worth considering such as CDs and treasury bonds, she said. "Those are great things to look at, where you don't have to worry about losing money, but right now, you could potentially lock in a rate of 4% or higher."
And if you're seeing banks online that you don't recognize, one thing you can do to check if they're legitimate is to visit the Federal Deposit Insurance Corp.'s website, fdic.gov.
"They have a great tool called the BankFind Suite," Brady said. "You can plug in the name of any bank that you're interested in doing business with and check to see if they have FDIC insurance and [if] they're actively in business."
Have a financial question you want answered by an expert? Leave us a voicemail at 312-321-2122 or email us at moneyquestions@suntimes.com.