retirement

Paying back a loan taken out of your IRA

Don TaylorDear Dr. Don,
Hello, I read your column about short-term, 60-day loans from an individual retirement account. How do you withdraw funds from an IRA? Can a person redeposit the funds back into the same IRA? Or can the money be deposited into a new IRA?

Egg in nest with money © Margie Hurwich/Shutterstock.com

Thanks,
-- Alan Alternatives

Dear Alan,
In a recent ruling, the U.S. Tax Court came down with a limit of this practice to one rollover per year for all of an individual's IRAs combined. In other words, it did not limit withdrawals to one per account; this ruling is more restrictive. While the court ruling was specific to the individual case, the IRS said it intends to follow the tax court's ruling. This shouldn't affect trustee-to-trustee rollovers, which wouldn't help you to get the loan you mentioned anyway.

IRS Publication 590, Individual Retirement Arrangements, addresses rolling over monies from one IRA into another. It states, "You can withdraw, tax-free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA. Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA." You can put the money back into the same IRA. Discuss this option with your current account provider before taking the money out of the account.

Generally, you should use IRA rollovers as a source of short-term funds. If you're stuck in a unique situation, it can be a one-time or once-a-year solution to a cash problem.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Ask the adviser

To ask a question of Dr. Don, go to the "Ask the Experts" page and select one of these topics: "Financing a home," "Saving & Investing," "Senior Living" or "Money." Read more Dr. Don columns for additional personal finance advice.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
CD & INVESTING NEWSLETTER

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

Blog

Jean Chatzky

Jean Chatzky: How to save wisely

These four smart savings moves can help set you on the right path to retirement.  ... Read more

advertisement
Partner Center
advertisement

Connect with us