An Individual Retirement Account, or IRA, can be an invaluable way to save for retirement while taking advantage of tax advantages. As with any investment vehicle, however, IRAs do come with restrictions and must be used carefully when investing.
One such activity is rebalancing, which involves regularly reviewing your portfolio to detect deviations from its intended targets and realigning your allocation accordingly. This often includes selling some stocks.
1. Rebalancing
Dependent upon budget, goals and retirement horizon, retirees may require shifting from an equity allocation towards fixed income investments or cash alternatives; risk tolerance assessments could also play an integral role.
IRAs offer unique characteristics that can play a pivotal role in the rebalancing process, such as keeping proceeds from stock sales in an IRA rather than being taxed out immediately, due to being tax-advantaged retirement accounts.
Selling stocks within an IRA to meet RMDs may also prove tax-savings beneficial; however, consult IRS Publication 590-B to calculate your RMD factor before working with your custodian to transfer in kind to a taxable brokerage account – however this approach may take longer if stocks in question have seen significant price appreciation since their inception.
2. RMDs
At 70 1/2, your Required Minimum Distributions (RMDs) from your IRA accounts become mandatory and must be calculated using your account balance at December 31st of the previous year. Your RMD amount can be found using this formula:
If you prefer keeping your IRA investments but simply need help lowering the tax bill for RMDs, a qualified charitable distribution (QCD) may be an ideal strategy for you. In 2025, this tactic allows you to exclude up to $108,000 of assets from taxable income – providing significant tax benefits.
For an inherited IRA, the same rules for annual RMDs apply, although their initial life expectancy factor might be reduced by the IRS. Speak to your retirement specialist about available strategies if this is your situation.
3. Taxes
Tax Advantages of an IRA
If you decide to sell investments held in a taxable account, you could potentially benefit by holding onto them for over one year before selling to qualify for lower long-term capital gains taxes. But this must align with your personal convictions and financial goals in order to qualify.
If you can’t hold on to an investment for long enough, consider donating its appreciated assets through a donor-advised fund instead of selling them yourself. That way, you can take a deduction on their fair market value (up to $3,000 annually), plus carry over net losses that exceed this threshold in order to offset future capital gains.
4. Liquidity
Liquidity is one of the key tenets of investing, as it indicates how easily an asset can be converted to cash without significant loss in its value.
Liquidity is essential to both individuals, businesses, and markets alike, providing short-term obligations can be fulfilled while taking advantage of growth opportunities.
Too much liquidity carries its own set of risks, however. Too much liquidity may signal inefficiencies or missed opportunities in a business plan, investment strategy or financial plan.
Selling stocks within an IRA requires carefully considering all of the unique factors that could influence your sale decisions, yet selling stock through any brokerage account should remain similar – you still must select shares, place a sell order and monitor market conditions in order to maximize returns.
