How to Borrow From an IRA Rollover

Strictly speaking, the Internal Revenue Service will not allow you to borrow money from your rollover individual retirement arrangement. However, there are certain strategies you can use to effectively take a loan from your rollover IRA. These strategies can be risky, as you may face substantial taxes and penalties if you fail to observe specific IRS regulations. However, thanks to a certain IRS provision, you can take what amounts to a 60-day loan from your rollover IRA once per year. If you are willing to transfer your money to a different type of retirement account, you may be able to take a more substantial loan.

Verify you have not rolled money into your rollover IRA in the past year. The IRS only allows one rollover per calendar year to or from any specific IRA rollover account.

Withdraw the amount you want to borrow from your rollover IRA. To take money out of any type of IRA, you typically have to file an IRA distribution form with the financial services company holding your IRA. Since you will ultimately replace this money in your IRA, do not have any taxes withheld from your distribution.

Use your funds for up to 60 days. While you can't technically take a loan from your rollover IRA, you can withdraw money from it without tax or other financial repercussions for 60 days.

Return the money to your rollover IRA within 60 days. The IRS requires rollovers to be completed within 60 days. While the intent of the rule may have been to ensure that money transferred from one IRA to another is moved within the 60 days, there is no rule preventing you from "transferring" your IRA money back to the same IRA.


  • Another option is to transfer your money to another qualified retirement plan, such as a profit-sharing plan. While the IRS forbids IRA loans, other types of retirement plans, such as profit-sharing plans, do permit loans. Many employers also allow loans from 401k plans. If you do not need to hold your money in a rollover IRA, you may be able to roll that money over to another retirement plan, enjoy the same tax-deferral of your investment income, and benefit from the ability to take out a loan.


About the Author

John Csiszar earned a Certified Financial Planner designation and served for 18 years as an investment counselor before becoming a writing and editing contractor for various private clients. In addition to writing thousands of articles for various online publications, he has published five educational books for young adults.