Early Withdrawal Fee if IRA is Reinvested?

Question:

Can the bank charge an IRA customer who is between the age of 59 1/2 and 70 1/2 an early withdrawal penalty if that person has the IRA invested in a certificate of deposit and the withdrawal is prior to maturity of the CD?

Answer:

The Internal Revenue Code generally has no interest in regulating your contractual penalties. Your bank is allowed, not required, to waive early withdrawal penalties on required IRA distributions. Some banks will waive the penalty once per calendar year. Others will waive it only up to the amount of the RMD.

First published on BankersOnline.com 9/06/10