||Ask Dr. Don
Borrowing from an IRA
Dear Dr. Don,
Can I get a loan against my IRA? Thank
you in advance for taking the time to answer my question!
You can't borrow against your IRA like you can in many 401(k)
or 403(b) employer sponsored plans.
You can withdraw the money from your IRA account and
then have 60 days to redeposit the money in the account or in a
new IRA account. If the money doesn't find its way back into an
IRA account within the 60-day period, it will be subject to taxes
Since the IRS looks at this as a nontaxable rollover,
you can only use this 60-day provision once a year. The clock starts
ticking on the date you receive the distribution, not the date you
redeposit the money into an IRA account.
Prior to age 59 1/2 there are situations where you
can withdraw the money without penalty. These exceptions are discussed
in full in IRS
Publication 590, Individual Retirement Arrangements, and
are reproduced here:
- You have unreimbursed medical expenses that are
more then 7.5 percent of your adjusted gross income.
- The distributions are not more than the cost of
your medical insurance.
- You are disabled.
- You are the beneficiary of a deceased IRA owner.
- You are receiving distributions in the form of
- The distributions are not more than your qualified
higher education expenses.
- You use the distributions to buy, build or rebuild
a first home.
- The distribution is due to an IRS levy of the qualified
See that IRS publication for all the details and definitions
concerning these exceptions.
-- Posted: March 8, 2002