My mom's IRA has gone down 60% just in 2008...?
She has lost $14K of her IRA in 2008. With only $11K or her IRA left and no guarantee for a recovery, is it better to cash out, pay the income tax and put the $11K into CD's where at least the money is safe? Please give reasons with your answer.
If she is under 59 1/2 she will get hit twice, her regular tax rate (maybe 15%) and the 10% early pentalty. Then she would pay tax on any future interest from the CD at her regular income tax rate. She would do better keeping it where it is, market is coming back. Don't take the double hit after a bad year.
If your mom is under 59 1/2 years old there is also a 10% penalty for cashing out which is $1,400.00 on 14K.
I would leave it along.
Going forward, she should put her future IRA contributions into another IRA with a bank (MM or CD), 2008 etc. You can own more than one IRA. Then when the market starts to turn back up she can resume contributing to her original IRA.