rebalance IRA while retired

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chimos99
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Joined: Mon Feb 03, 2025 10:10 pm

rebalance IRA while retired

Post by chimos99 »

I have been tasked with rebalancing my mom's roll over IRA. She is in 100% VTSAX and I want to balance it out with a bond fund, probably VTEAX. I am aware that she will not be taxed as long as everything stays inside the IRA account as it is rebalanced. However, I saw something that said she might not be able to rebalance if she no longer has an income. I haven't found anything that specifically answers my question. Can she rebalance into bonds within the IRA now that she is retired (not making an income)? I do not want to cause her any headaches. Any advice is greatly appreciated.
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retired@50
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Re: rebalance IRA while retired

Post by retired@50 »

chimos99 wrote: Mon Feb 03, 2025 10:24 pm I have been tasked with rebalancing my mom's roll over IRA. She is in 100% VTSAX and I want to balance it out with a bond fund, probably VTEAX. I am aware that she will not be taxed as long as everything stays inside the IRA account as it is rebalanced. However, I saw something that said she might not be able to rebalance if she no longer has an income. I haven't found anything that specifically answers my question. Can she rebalance into bonds within the IRA now that she is retired (not making an income)? I do not want to cause her any headaches. Any advice is greatly appreciated.
Welcome to the forum.
A few things...
Transactions that occur within an IRA are not reported to the IRS, so they are not considered taxable events. In other words, it's okay to rebalance within the IRA.

Using VTEAX seems like a poor choice. This fund is a tax-exempt bond fund designed for taxable accounts, not IRAs. It's typically best to use a taxable bond fund inside an IRA. Something like VBTLX might suit her needs.

Where did you "see something"? I suspect the article or news item might have been referring to the rule that one cannot contribute to an IRA without earned income. Rebalancing existing amounts within an IRA is not the same as contributing (adding money) to an IRA.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
rkhusky
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Re: rebalance IRA while retired

Post by rkhusky »

There are balanced and all-in-one funds that do the rebalancing for you. You could look at Vanguard’s LifeStrategy or Target Retirement funds or the Balanced fund or the active, but low cost, Wellington or Wellesley funds. These are all great for IRA’s and other tax-advantaged accounts.

The choice would depend on what ratio of stocks/bonds you want and whether you want any International diversification or stick with just US.
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KEotSK66
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Re: rebalance IRA while retired

Post by KEotSK66 »

rkhusky wrote: Tue Feb 04, 2025 7:19 am There are balanced and all-in-one funds that do the rebalancing for you. You could look at Vanguard’s LifeStrategy or Target Retirement funds or the Balanced fund or the active, but low cost, Wellington or Wellesley funds. These are all great for IRA’s and other tax-advantaged accounts.

The choice would depend on what ratio of stocks/bonds you want and whether you want any International diversification or stick with just US.
Agreed.

If "she" wants to index then go with a LifeStrategy fund or the Balanced Index; otherwise, Wellington or Wellesley.

These 4 one-stop funds offer too many benefits to list, besides rebalancing.

I wouldn't use a Target Retirement fund, the changing asset allocation over time is effectively strategic timing.
"I just got fluctuated out of $1,500.", Jerry🗽
rkhusky
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Re: rebalance IRA while retired

Post by rkhusky »

KEotSK66 wrote: Tue Feb 04, 2025 8:01 am
rkhusky wrote: Tue Feb 04, 2025 7:19 am There are balanced and all-in-one funds that do the rebalancing for you. You could look at Vanguard’s LifeStrategy or Target Retirement funds or the Balanced fund or the active, but low cost, Wellington or Wellesley funds. These are all great for IRA’s and other tax-advantaged accounts.

The choice would depend on what ratio of stocks/bonds you want and whether you want any International diversification or stick with just US.
Agreed.

If "she" wants to index then go with a LifeStrategy fund or the Balanced Index; otherwise, Wellington or Wellesley.

These 4 one-stop funds offer too many benefits to list, besides rebalancing.

I wouldn't use a Target Retirement fund, the changing asset allocation over time is effectively strategic timing.
TR Income has a fixed allocation of 30/70.
earlyout
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Re: rebalance IRA while retired

Post by earlyout »

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Last edited by earlyout on Tue Feb 04, 2025 9:50 am, edited 2 times in total.
earlyout
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Re: rebalance IRA while retired

Post by earlyout »

The article that suggested rebalancing was not possible w/o earned income was probably assuming one was rebalancing by adding new money to the IRA and buying additional securities to rebalance the account. It is always possible to rebalance by selling and buying within the IRA.
Mike Scott
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Re: rebalance IRA while retired

Post by Mike Scott »

KEotSK66 wrote: Tue Feb 04, 2025 8:01 am
rkhusky wrote: Tue Feb 04, 2025 7:19 am There are balanced and all-in-one funds that do the rebalancing for you. You could look at Vanguard’s LifeStrategy or Target Retirement funds or the Balanced fund or the active, but low cost, Wellington or Wellesley funds. These are all great for IRA’s and other tax-advantaged accounts.

The choice would depend on what ratio of stocks/bonds you want and whether you want any International diversification or stick with just US.
Agreed.

If "she" wants to index then go with a LifeStrategy fund or the Balanced Index; otherwise, Wellington or Wellesley.

These 4 one-stop funds offer too many benefits to list, besides rebalancing.

I wouldn't use a Target Retirement fund, the changing asset allocation over time is effectively strategic timing.
If the money is at Vanguard, look at the choices quoted above and see if one of them matches mom's desires. When the decision has been made, simply exchange everything inside the IRA to the new fund and set to reinvest distributions. No tax event. No reporting. Just be sure you are working in mom's best interests.
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