Bankrate.com
Rebalancing investments in your IRA
Tuesday August 14, 6:00 am ET
George Saenz


Dear Tax Talk:
Can I roll over money from my traditional IRA to a money market account without tax consequences? I don't plan on touching the money. I just want to move it to a location less vulnerable than the stock market, like a money market fund because this will be more stable. I will turn 58 this year. Thank you in advance for your help.
--Larry

Dear Larry,
It is understandable that you would want to change your investment strategy. As we age, our investment time-frame changes, decreasing our tolerance for risk.

When you're in your 30s, your investment time frame for retirement savings is probably well over 20 years. This will allow you to recover from most downturns in the stock market. At 58 years of age, you may be thinking of early retirement and want to be assured your capital will remain intact. Hence, you'll move away from investments that put your capital at risk, such as equities, and move to safer investments, such as money markets.

This rebalancing of your portfolio doesn't mean you have to take your funds out of an IRA. This is especially true when you're under age 59-and-a-half, when most retirement fund withdrawals will result in a 10 percent penalty.

An IRA is an investment account designation. An IRA-designated account can be invested in most traditional investments, such as money markets, certificates of deposit and stocks. One IRA can be invested in more than one type of investment product. For example, you can have an IRA that is 50 percent CDs and 50 percent stocks.

When you rebalance, you may want to consider leaving some of the account that you may not need in the near future in an investment product that can yield better returns than a money market fund.

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.