Because you have total control, you can transfer your IRA balance to a savings account if you like. However, you will likely have to pay taxes and penalties on that money.
Trustee-to-trustee transfer – If you're getting a distribution from an IRA, you can ask the financial institution holding your IRA to make the payment directly from your IRA to another IRA or to a retirement plan. No taxes will be withheld from your transfer amount.
You may be able to transfer money in a tax-free rollover from your SIMPLE IRA to another IRA (except a Roth IRA) or to an employer-sponsored retirement plan (such as a 401(k), 403(b), or governmental 457(b) plan).
For indirect IRA rollovers:
You must roll over the check amount and the 20% withheld within 60 days for the distribution to be tax-free. This applies even though you didn't receive the 20%. If you do this, you might get most of the withheld amount back in a tax refund because you won't pay the tax on the withdrawal.
Key takeaways: Cashing out of a retirement account before the age of 59 ½ is not generally recommended, but there are cases where it may make sense. With immediate access to funds comes income taxes and potential early withdrawal penalty, which reduces the amount you will receive.
An IRA transfer can be made directly to another account, and IRA transfers can also involve the liquidation of funds for depositing capital in a new account.
You can take distributions from your IRA (including your SEP-IRA or SIMPLE-IRA) at any time. There is no need to show a hardship to take a distribution. However, your distribution will be includible in your taxable income and it may be subject to a 10% additional tax if you're under age 59 1/2.
Key Takeaways
You can change your individual retirement account (IRA) holdings from stocks and bonds to cash, and vice versa, without being taxed or penalized. The act of switching assets is called portfolio rebalancing. There can be fees and costs related to portfolio rebalancing, including transaction fees.
If you're at least age 59½ and your Roth IRA has been open for at least five years, you can withdraw money tax- and penalty-free. See Roth IRA withdrawal rules.
What is the difference between a transfer and a rollover? A transfer is used to move funds from one institution to another without changing the account type. A direct rollover is used to move funds from an employer plan to another account type like an IRA, without having to pay taxes.
Moving funds from an IRA to a traditional savings account typically counts as an early withdrawal, which means the money would be subject to the taxes and penalties we discussed before. A few exceptions may limit taxes and penalties when transferring your IRA to a savings account.
If you're disabled, you can withdraw IRA funds without penalty. If you pass away, there are no withdrawal penalties for your beneficiaries. You can avoid an early withdrawal penalty if you use the funds to pay unreimbursed medical expenses that are more than 7.5% of your adjusted gross income (AGI).
If you've already established retirement savings through an Individual Retirement Account, you may be ready to roll your contributions into an IRA CD, that will grow your funds with a fixed rate guarantee of return throughout your retirement.
Some IRA custodians charge a fee for all outgoing IRA-to-IRA transfers while others only charge a fee when the transfer is closing out your entire IRA balance.
Generally, early withdrawal from an Individual Retirement Account (IRA) prior to age 59½ is subject to being included in gross income plus a 10 percent additional tax penalty. There are exceptions to the 10 percent penalty, such as using IRA funds to pay your medical insurance premium after a job loss.
Required minimum distributions (RMDs) are the minimum amounts you must withdraw from your retirement accounts each year. You generally must start taking withdrawals from your traditional IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts when you reach age 73.
Generally, the amounts an individual withdraws from an IRA or retirement plan before reaching age 59½ are called "early" or "premature" distributions. Individuals must pay an additional 10% early withdrawal tax unless an exception applies.
IRAs are more flexible and liquid than you might think
However, you'll still owe income tax and a 10% penalty on earnings (or money you earn on your contributions) you take out of your Roth IRA before retirement with a few exceptions.