Ask a Fool: Can I Borrow Money From My IRA?

Q: I need some cash for home repairs and have quite a bit of money in an IRA. Can I borrow some of it?

The short answer is no. Unlike with 401(k)s and other employer-sponsored retirement accounts, there's no such thing as an IRA loan. In fact, the IRS even goes so far as to say that if an IRA owner borrows money, the entire account ceases to be an IRA, and its value will be included in the owner's income.

Having said that, there's one potential way to get around this, but it can be risky.

Specifically, the IRS' rollover rules say that you can withdraw money from an IRA as long as you redeposit it into a qualifying retirement account within 60 days. So you can theoretically borrow money from your IRA if you're confident that you'll be able to put the money back within 60 days.

However, if you are unable to redeposit the money, it will be treated as a distribution and you can face a 10% early withdrawal penalty unless you're at least 59 1/2 years old, plus any taxes you might owe. Furthermore, you'll have reduced your retirement nest egg. For these reasons, attempting to take a short-term "loan" from your IRA is generally a bad idea. It's just not worth the risk.

In addition, if your money is in a Roth IRA, it's worth mentioning that you are free to withdraw your original contributions, but not any investment gains, at any time and for any reason. This isn't a loan, since you can't put the money back, but it could help you finance expenses in a pinch.

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