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Columns: Tax Talk
George Saenz, CPA   Expert: George Saenz, CPA
Tax Talk
You can reposition portfolio in safer investments within IRA
Tax Talk

The rules on rolling over an IRA
 

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

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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 59½, 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.

Bankrate.com's corrections policy -- Updated: Nov. 29, 2007
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