Borrow From IRA – Is IRA Borrowing Allowed?

Some retirement plans allow you to borrow against your account value. The question becomes, can you borrow from IRA’s?

IRA borrowing is not allowed. However, you can do a few things that are very similar to IRA borrowing if you’re in a cash crunch.

IRA Borrowing in 60 Days

If you want to borrow from your IRA, you can do something that is technically not a loan but accomplishes the same purpose. You need to be careful when you try to borrow from your IRA – check the tax laws and ask your tax advisor before you use this strategy.

You can effectively accomplished IRA borrowing by doing a 60 day rollover. With this strategy, you take a distribution from your IRA and return the funds to the account within 60 days. Although you don’t technically borrow from your IRA, it will feel the same to your checkbook.

Again, you have to be careful. You’re only allowed to do this one time per year, and you really should consult with your tax preparer to make sure you’re not going to get in trouble with the IRS.

Borrow from IRA vs Borrow from 401(k)

Note that when you borrow from a 401(k) plan, it is actually a loan. You have an interest rate and repayment schedule. However this type of loan is not a feature of IRA accounts. It’s not even a feature of all 401(k) accounts – it’s an optional feature that your employer can choose to include or not.