Recently I had a client call in and inquired about borrowing against their IRA. Borrowing can be more commonly associated with 401k’s, 403b’s and cash value life insurance policies. With IRA’s, “borrowing” is not allowed. You are allowed to withdraw money with a 60 day grace period to put the money back. If not, you will be taxed and penalized (if under 59 ½) on the amount you took out.
60 Day Grace Period
The 60 day grace period is considered to be a nontaxable rollover, so you are allowed to do this once every 12 month period. Please note that the 12 month period begins the day you received the check, not the day you redeposit into the IRA.
Be Cautious of This Strategy
If you are considering this strategy, be extremely conscious of the 60 day window. 60 days does not mean two months and don’t think that they exclude holidays and weekends. The IRS is very strict on this and you don’t want to pay tax and penalty when you don’t have to.
Typically, you would want to explore other borrowing options. But if you have opportunity that you need to act on quick, taking money from your IRA in this fashion might be your best option.
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