Taking money out of your retirement account is never a good idea. This is something that you want to save for when it is time for you to retire. However, you might find that you are in a financial pinch and there really isn't anything else you can do. If you are faced with this particular dilemma, you might wonder if you can take a loan from your IRA. The short answer to this question is, "No, you can't take a loan out from your IRA." The long answer, is "Sometimes, as long as you follow some very specific rules."
The main reason you can't borrow money from your IRA is because it is not taxable income yet. This would basically be like putting money into your IRA, reducing your tax burden, then taking the money out, free of charge. This simply is not going to work. You can borrow against other retirement accounts, such as a 401k or a 403(b), but not an IRA. It is possible, however, to take money out of your IRA, as long as you pay the money back within the next 60 days, or at least redeposit the money into another IRA. If you do not deposit the money during this 60 day grace period, you will both be taxed the money you took out of the account but also have to pay a penalty on the account as well.
There are times where you can take money out of your account before the 59.5 age (when you can start withdrawing money from the account) without any sort of penalty. If you...
- have unreimbursed medical expenses that are going to cost more than 7.5% of your adjusted gross income.
- are disabled or the beneficiary of a deceased IRA owner, you can withdraw from the account.
- want to purchase or build a first home
- need the money because of an IRS levy.
On top of only having the 60 day grace period option, you can only use this once a year as well. This isn't just once per calendar year, but once in a 365-day cycle. The moment you take the money out of your account, you are not allowed to do so again for 365 days from that specific date.
