Can I Change My IRA Holdings?
- Many people have a misconception about what an IRA is. Some believe that an IRA is a type of investment, similar to a stock or mutual fund. In fact, the IRA is simply a type of account that holds various investments. You choose the individual investments that go into your IRA. You could put a number of investments in your IRA, such as stocks, bonds, mutual funds and exchange traded funds.
- If you decide you want to change the investments in your IRA, the process typically is simple. Most IRAs allow you to access your account through an online interface. From this online interface, you usually can sell the securities that you have in your account. Once the securities are sold, you can use that money to purchase other securities. This is similar to what you would do with a normal brokerage account. With most IRAs, there are no limits on the number of times you can change your investments.
- As you get closer to retirement, you may find it beneficial to reallocate your assets from time to time. According to the Securities and Exchange Commission (SEC) website, many experts recommend putting more fixed income securities into your portfolio as you get older. While you are younger, you have plenty of time to work and save for retirement, and many choose to put most of their money into stocks or equity mutual funds, which carry more risk than fixed-income securities but also have greater earning potential. As you get closer to retirement, moving this money into bonds can help keep your retirement money safer.
- When you change investments within your IRA, transaction costs often are involved. Every time you sell or buy a security in your IRA, your broker typically gets a commission. If you are constantly buying and selling, these fees can eat up a significant portion of your retirement money. Because you are investing with a long-term time horizon, putting your money into securities that you can buy and hold is an option to consider.