Yes, you can move your IRA to a money market account without losing its tax-advantaged status, as long as the money stays inside an IRA. The cleanest way is a direct trustee-to-trustee transfer: your current custodian sends the funds straight to the new institution, you never touch the money, and there are no taxes, no penalties, and no limits on how many transfers you can do in a year.1Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
The rest comes down to a few decisions: which money market product you want, which transfer method you use, and whether anything about your situation (age, inherited account, SIMPLE IRA) adds a rule.
Which IRAs Can Hold Money Market Investments
All the common IRA types work. Traditional, Roth, SEP, and SIMPLE IRAs can each hold a money market account at a bank or a money market mutual fund at a brokerage. Shifting the holdings doesn’t change the tax character of the account itself: a Traditional IRA stays tax-deferred, a Roth stays tax-free.
One exception matters. During the first two years after you begin participating in a SIMPLE IRA, you can only transfer SIMPLE IRA funds to another SIMPLE IRA. Move the money to a Traditional IRA, a brokerage money market fund, or anything else in that window and the IRS treats it as a taxable distribution with a 25 percent penalty on top of ordinary income tax, rather than the usual 10 percent.2Internal Revenue Service. SIMPLE IRA Withdrawal and Transfer Rules After two years, you can transfer to any IRA type without that extra penalty.
Money Market Account at a Bank vs. Money Market Fund at a Brokerage
“Money market” covers two different products, and the protections are not the same.
Money Market Account at a Bank or Credit Union
This is a deposit product, similar to a savings account with a somewhat higher rate and sometimes limited check-writing. Held inside an IRA at an FDIC-insured bank, deposits are insured up to $250,000 under the “Certain Retirement Accounts” ownership category, which is separate from your personal checking and savings coverage at the same bank.3FDIC.gov. Certain Retirement Accounts So your IRA money market deposits get their own $250,000 of coverage even if you already have $250,000 in regular deposits at that institution.4FDIC.gov. Understanding Deposit Insurance As of early 2026, the national average yield is about 0.43 percent APY, though online banks often pay more.
Money Market Fund at a Brokerage
A money market fund is a mutual fund that invests in short-term debt like Treasury bills and commercial paper. It aims to hold a stable one-dollar share price, but it is not FDIC-insured. If the brokerage fails, SIPC protects up to $500,000 in customer assets with a $250,000 sublimit for cash. SIPC treats money market mutual funds as securities, not cash, so they count toward the full $500,000 rather than the smaller cash sublimit.5SIPC. How SIPC Protects You SIPC covers brokerage failure, not a drop in the fund’s value.6Securities Investor Protection Corporation. What SIPC Protects
Money market funds also charge an annual expense ratio, deducted from returns. To compare a fund’s return with a bank’s advertised APY on even terms, look at the fund’s seven-day SEC yield, which is a standardized after-fee figure.
Direct Transfer vs. 60-Day Rollover
You have two ways to move the money, and the choice has real tax consequences.
Direct Trustee-to-Trustee Transfer
Your current custodian sends the funds straight to the new institution. You never receive the money. The IRS does not treat this as a distribution, it generally is not reported on Form 1099-R,7Internal Revenue Service. Instructions for Forms 1099-R and 5498 the one-rollover-per-year limit does not apply, and there is no withholding. You can do as many of these as you want in a year. For most people moving an IRA into a money market product, this is the right method.
Indirect (60-Day) Rollover
Here the custodian pays the money to you, and you have 60 days to deposit the full amount into the new IRA.8Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts Miss the deadline and the entire amount is a taxable distribution. If you’re under 59½, add a 10 percent early withdrawal penalty on top of income tax.9Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions From Traditional and Roth IRAs
Federal law allows only one indirect IRA rollover across all your IRAs in any 12-month period. A second one inside that window is treated as a taxable distribution.8Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts Direct transfers are not subject to this limit.
One more thing to watch. If the funds are coming from an employer plan like a 401(k) rather than from an IRA, the plan must withhold 20 percent for federal income tax, even when you intend to roll it over, and you’d need to replace that 20 percent from other money to roll over the full amount.1Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions IRA distributions carry a default 10 percent voluntary withholding that you can waive.
If you did take an indirect rollover and missed the 60 days, the IRS allows a self-certified waiver in specific circumstances listed in Revenue Procedure 2016-47, such as a financial institution error, serious illness, a misplaced check, or postal error.10Internal Revenue Service. Retirement Plans FAQs Relating to Waivers of the 60-Day Rollover Requirement Self-certification lets the new custodian accept the late deposit, but the IRS can still review and deny it on audit.
Required Minimum Distributions Still Apply
If you’re 73 or older (the current starting age under SECURE 2.0 for people born between 1951 and 1959, rising to 75 for those born in 1960 or later), you owe an annual required minimum distribution from your Traditional, SEP, or SIMPLE IRA.11Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) Moving the IRA into a money market account does not excuse the RMD.
And this is the trap: a trustee-to-trustee transfer is not a distribution, so it does not satisfy that year’s RMD. If you’re in an RMD year and planning to transfer, take the RMD first, or have the current custodian distribute it before the transfer. Otherwise you can land at the new institution with no record of the RMD being met, and face a 25 percent excise tax on the shortfall.
Roth IRAs are the exception. The original owner never has to take RMDs during their lifetime, so transferring a Roth to a money market account raises no RMD timing issue.11Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
Inherited IRAs Follow Different Rules
If you inherited an IRA from someone other than a spouse, you cannot roll it into your own IRA or treat it as yours. You can still move it to a new custodian by a trustee-to-trustee transfer, as long as the new account stays titled in the deceased owner’s name for your benefit as beneficiary.12Internal Revenue Service. Publication 590-B, Distributions From Individual Retirement Arrangements (IRAs)
Non-spouse beneficiaries cannot use the 60-day indirect method at all. If the custodian cuts a check payable to you personally, the IRS treats the full amount as a taxable distribution and you cannot put it back into an inherited IRA. Direct trustee-to-trustee transfer is the only way to move an inherited IRA into a money market product.
The move does not reset distribution deadlines. Under the 10-year rule that applies to most non-spouse beneficiaries, the full balance must be withdrawn by December 31 of the year containing the 10th anniversary of the original owner’s death.12Internal Revenue Service. Publication 590-B, Distributions From Individual Retirement Arrangements (IRAs) A money market account can be a reasonable place to hold the balance while you draw it down.
Timeline, Paperwork, and Fees
To start a transfer, you’ll need your current account number, the legal name and address of the current custodian, and the custodian’s Employer Identification Number. The receiving institution supplies a transfer request form that asks whether you’re moving the full balance or a partial amount and where it’s going. Many firms handle this online; some still want a physical signature. Large transfers may require a medallion signature guarantee, a special stamp from a bank or brokerage certifying your identity. Not every branch issues them, so call ahead.
Direct transfers typically take seven to fourteen business days. Electronic transfers through the Automated Customer Account Transfer Service (ACATS) can settle faster than paper-based requests.13DTCC. Automated Customer Account Transfer Service (ACATS) If your IRA currently holds stocks, bonds, or mutual funds, the custodian will usually liquidate them and send cash; money market fund shares are typically sold and transferred as cash rather than moved in kind. Any gains or losses from liquidation inside the IRA are not taxable events.
Watch for outgoing transfer or account-closing fees, often between $50 and $150. Some firms waive the fee for partial transfers or for customers with other accounts, and the receiving institution will sometimes reimburse it to win your business. Ask before you start. Money market mutual funds also carry expense ratios, which come out of fund earnings automatically rather than being billed.
Keep copies of the transfer request, confirmation letters from both institutions, and statements showing the outgoing and incoming balances. For an indirect rollover, note the exact date you received the funds and the date you redeposited them. That paperwork is what proves you followed the rules if the IRS ever asks.