There are two ways to interpret this question. One is changing the investments, and the other is avoiding the tax consequences of taking the money out now.
Changing Investments If the value of your accounts has gone down, you may want to consider investing your money in something else. Many different types of investments can be held in an IRA. Sometimes you can just buy and sell within your current IRA account. Other times you may need to open a new IRA for the new investment. If you contact the trustee of the new investment and have them arrange the transfer "trustee to trustee," you will not have to worry about the 20% withholding that will be deducted if you have the money paid to you directly. Many different types of investments can be held in an IRA. For more information on IRAs, see IRS publication 590. To receive free copies of IRS forms and publications, call the IRS Forms Distribution Center at 1-800-TAX-FORM (1-800-829-3676), or visit http://www.irs.gov.
Avoiding Tax Consequences There are two steps you might consider that relate to the tax consequences of your retirement funds. First, if you haven't done so already, think about making new contributions to a Roth IRA. Although your contributions do not reduce your taxable income when you make your initial contribution, you will not pay tax when you begin to withdraw funds five years after your first contribution and if you are at least 59 1/2 years old. Remember, you can withdraw contributions tax free at any time, but earnings generally have to stay in a Roth IRA account until you're 59 1/2 to avoid a penalty. You may contribute $5,000 (if you have that much in earned income) annually to a Roth IRA in your name. If you are 50 or older, you can put an additional $1,000 in a Roth IRA (these are 2012 figures) each year. You can also contribute equal amounts to a Roth IRA for a nonworking spouse. Check income and other eligibility requirements carefully. You may also want to convert your traditional IRAs to Roth IRAs. If you think that converting to a Roth IRA might be an advantage to you, contact a tax advisor for assistance.
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