Q&A: "Borrowing" from an IRA

October 17, 2008

I need a quick source of cash. Is it possible to tap funds from my individual retirement account, assuming I plan to repay the account?

Q: I need a quick source of cash. Is it possible to tap funds from my individual retirement account, assuming I plan to repay the account?

A: You can access your IRA funds as long as you put the money back within 60 days. Note that most financial planners don't recommend this maneuver, but if you feel you have little choice, it is an option. An IRA has a 60-day rollover period, during which you have time to deposit the money into another (or the same) IRA after having received it from your provider. You can elect to receive a distribution, use the money for whatever you like, and then redeposit the funds into your account. The catch, of course, is that if you spend the money, you have to find a way to replenish the funds within 60 days, which could require you to take out a loan or sell off investments. Failure to do so could result in a 10 percent early distribution penalty by the Internal Revenue Service. That's one reason why the move should only be considered as a last financial resort.