How to Convert IRA Funds to Government Bonds

IRAs and municipal bonds both offer tax advantages.

IRAs and municipal bonds both offer tax advantages.

Using an IRA to save for retirement makes good sense, as it allows you to sidestep capital gains taxes as your investments grow. Federal government bonds are considered very safe, while municipal bonds offer their own tax advantages. If your IRA holdings tank, you might decide to remove the money into the safer haven of government bonds. You might choose the same action if your other investments outpace the growth of your IRA holdings so as to outstrip the effect of IRA tax advantages. Once you reach a certain age, income security might outweigh your portfolio demand for growth.

Contact your IRA trustee to liquidate all or part of your account. If you plan to convert the entire account to government bonds, you will need to fill out closing paperwork and possibly pay a fee. Otherwise, specify the amount you want liquidated via your bank or brokerage's online or paper form. Let the trustee know if you prefer to receive the money by mailed paper check.

Look for the sum in your bank or brokerage cash account. Selling your IRA holdings and depositing the cash might take up to five business days. If you opt to receive a check by mail, processing time will be increased.

Set up an account to buy the bonds. You can buy bonds through a traditional or online brokerage. Most require you to set up an account by providing your personal contact information and your Social Security number. Other financial data may also be required. Some brokerages charge an account maintenance fee and per-transaction fees, among others. You might have the option of linking your brokerage account to one of your checking or savings accounts

Buy the government bonds with your newly liquidated funds.


  • You can buy federal government bonds, bills and notes directly via the TreasuryDirect website. Creating an account is a straightforward process.


  • If you take money out of a traditional IRA before you reach age 59 1/2, you will have to pay income tax and a 10 percent penalty on the amount withdrawn.
  • You can always remove the principal from a Roth IRA free of tax or penalty. But any earnings you remove before age 59 1/2 are subject to a 10 percent penalty.

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