Can IRA Money Be Lost?

When your IRA’s value declines, don’t panic – just like any investment account, your IRA could lose money too; but there are steps that you can take to recover any lost funds.

An Individual Retirement Account, or IRA, allows investors to invest in securities such as stocks and mutual funds. As their values fluctuate over time, so will your IRA balance – though its balance could either decline or increase as your investments fluctuate in value.


Individual retirement accounts (IRAs) are an excellent way to save for retirement. They provide tax deductions upfront as well as tax-deferred investment growth – though there are strict rules you must abide by or else face stiff penalties.

Each dollar you deposit into a traditional IRA reduces your income tax for that year, helping bridge gaps between tax brackets. For instance, if you fall within the 24% bracket and make a $6,500 contribution to an IRA during that year, your taxable income will decrease by an estimated amount of about $1,560.

State and local income taxes as well as property or sales taxes may also be deducted, while withdrawals made prior to age 59 1/2 must pay income taxes with a possible 10% penalty assessed against them; exceptions include using this money for medical expenses that exceed 7.5% of adjusted gross income or for first-time home purchase or qualified higher education expenses.


Savers typically incur a 10% early withdrawal penalty from retirement accounts such as IRAs and workplace plans like 401(k). But there may be exceptions.

IRS rules permit withdrawing from an IRA without incurring penalties to cover medical or higher education expenses that qualify as substantial, as well as to fund first-time home purchases and active duty deployment obligations.

Carbonaro emphasizes the need for traditional IRA owners over age 70 1/2 to begin taking required minimum distributions (RMDs), or RMDs, so as to prevent taxing authorities from taxing funds indefinitely. RMDs help avoid such taxes being levied on retirement savings indefinitely by the government, according to Carbonaro.

Individuals may be tempted to increase their RMDs in anticipation of tax savings as they age; however, this would be a mistake since your RMD amount depends on both your life expectancy and account balance at year-end.

Lost Funds

Many people misplace their retirement accounts when changing jobs or experiencing life events such as divorce. Millions in unclaimed assets end up at state unclaimed property offices each year and only a fraction of these forgotten assets can be claimed by their owners.

Due to this problem, companies have emerged that specialize in finding lost IRAs for clients. You may also find yours by searching password management apps, emails and hard copies documents for clues as to where your money may have been invested.

Your IRA could also be affected by its investments’ fluctuation, both positively (when your portfolio gains) and negatively (if it decreases), potentially necessitating distribution from your account, which may come with additional tax penalties depending on your age.


Individuals looking for additional ways to save for retirement outside their workplace plans can open a traditional, Roth or SEP IRA to increase savings tax-deferred. Traditional IRAs use pretax dollars, while Roth and SEP IRAs tend to be used by self-employed people or small-business owners.

Watching your IRA balance dip can be alarming, but the best approach may be to remain calm and wait it out. The economy moves in cycles, so your account’s value may dip due to market downturn or overexposure to certain stocks; yet recovery should come more rapidly than you anticipate with patience. For those close to retirement age however, shifting some funds to less volatile investments like bonds may make sense so your money grows slowly while still protecting against market turns as effectively – this highlights why monitoring investment portfolio regularly is so crucial!

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