How to Convert an IRA Into Cash

Whether you don't feel safe with your investments, or you need to make a cash distribution, there may come a time when you need to convert your Individual Retirement Account into cash. The important thing to remember is that in terms of converting into cash, an IRA account is the same as any taxable investment account. The only difference is if you intend to physically withdraw your funds from an IRA account, in which case your distribution may incur taxes and penalties.

Assess your overall financial situation. Bear in mind that any financial decision has consequences, and be sure that converting your IRA to cash is your best course of action. For example, liquidating securities to raise cash in your IRA will most likely involve fees or commissions, and will change your investment plan and results.

Contact your financial services firm and sell all of your securities. Once you have decided to raise cash in your IRA, the simple actionable step is to sell all that you own in the account.

Choose your course of action with your cash. Now that you have converted your IRA to cash, it is time to act on your plan. If you have chosen cash as an investment option, your task is complete; if you have converted your IRA to cash to make a distribution, file the appropriate paperwork with your firm to receive your cash.

Maintain records of your transactions. If you converted your IRA to cash for investment purposes, you will want to record your purchase and sale information. If you have made a distribution, you will have to file this information on your tax return. In either event, while your IRA custodian should have its own records, you should also maintain a copy for your own files.

Tips

  • As converting an IRA to cash can involve complex financial issues, you may want to consult with a financial or tax adviser before you proceed.

References

About the Author

John Csiszar earned a Certified Financial Planner designation and served for 18 years as an investment counselor before becoming a writing and editing contractor for various private clients. In addition to writing thousands of articles for various online publications, he has published five educational books for young adults.