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Borrowing Against Your IRA Temporarily

The Menashe Morley Group

Borrowing Against Your IRA Temporarily

Short-term cash needs can wreak havoc on personal finances when assets are not liquid or you simply do not want to sell at the time. One solution may be to tap your IRA, temporarily. This can be done at any age without penalties or tax consequences provided you strictly follow the rules.


IRS regulations provide a 60-day window to rollover an IRA. Consequently, you can draw funds out of your IRA for up to 60 days and use them for any purpose. Provided you deposit the funds back into an IRA by the 60th day, there is no tax consequence. But beware; the IRS is very strict about the 60 days. Miss the deadline by one day and you may not redeposit the funds and taxes and penalties will apply.


Also, you can only do this once in a 12-month period for any IRA. If you have rolled over funds to that IRA in the previous 12 months, you cannot do it again for another 12 months.   You can, however, rollover with a different IRA. Assume you have two IRAs: IRA-1 and IRA-2. If you take a withdrawal from IRA-1 and roll it back into IRA-1 you cannot rollover IRA-1 again for 12 months. However, you would still be able to rollover IRA-2 as the rule applies separately to each IRA account.


If you withdraw something other than cash, you must deposit the same asset back to the IRA. Say you withdrew 500 shares of XYZ Co. stock, placed it into a margin account, and borrowed against it for 40 days. You would need to move the 500 shares of XYZ Co. stock back to the IRA.


Other rules may apply so consult with your financial advisors and your tax accountant before doing this. If you have needs beyond 60 days, this strategy will not work.

The Menashe Morley Group

David Menashe is a Senior Vice President and Wealth Management Advisor, and Bruce Morley is a First Vice President and Wealth Management Advisor, for Merrill Lynch, Pierce, Fenner & Smith Incorporated, a registered broker-dealer, Member SIPC, and a wholly owned subsidiary of Bank of America Corporation. (858.381.8113)

Photo by Andy Templeton



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