Have you ever thought of borrowing money from your IRA? While 401(k) plans typically have loan provisions, there are no such provisions when it comes to IRAs. That being said, it is possible to take a short-term loan from your IRA without exposing yourself to taxes or penalties…
As it turns out, you can withdraw funds from your IRA for 60 days without running into any tax-related issues. This 60 day window is actually intended to allow investors to roll their account over from one IRA custodian to another. However, there’s nothing in the IRS regulations that says you have to put the funds into a new account — after all, you could change your mind before completing the rollover and decide to put the money back where it came from. Hence, you could actually pull money from your IRA, use it to bridge a short-term rough patch, and then stick the money back in before the 60 day window is up. No fuss, no muss.
A few things to keep in mind before you decide to do something like this… First, you can only do this once within a one-year period for each IRA. Second, it’s possible that the IRA custodian will want to withhold funds from your withdrawal. Unfortunately, you won’t be able to get these withheld funds back until you file your taxes, yet you’ll still have to put the full amount back into your IRA before the end of 60 days. If not, you’ll face have to pay taxes (if applicable) and a 10% penalty on the shortfall.
Finally, I’m not saying that this is a good idea. Rather, I’m just putting it out there as a possible source of short-term funds. Remember, once the money has been out for 60 days, it’ll be subject to taxes and/or a 10% penalty. Moreover, the only way to build your IRA back up at that point will be via regular contributions, which are subject to strict annual limits.