Frequently Asked Question

April 09 2008 | Filed Under ยป

Can an IRA be used as security for a loan?

The IRS prohibits the use of an IRA as security for a loan. If an individual borrows money against his or her IRA, the IRA ceases to be an IRA as of the first day of the year in which the transaction occurs. This means that the IRA balance as of the first day of the year is treated as an IRA distribution, which may be subject to income tax. If the IRA owner is under the age of 59.5, the amount may also be subject to an additional 10% early-distribution penalty.

This question was answered by Denise Appleby
(Contact Denise)
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Denise Appleby

Denise Appleby
Denise Appleby is founder and owner of Appleby Retirement Consulting,which provides technical consultation, content, coaching, writing, editing and training services on related topics.


With more than 14 years of experience in the IRA and defined-contribution plans fields, Appleby has held several senior retirement-plan related positions with Pershing LLC, which included vice president of plans products and services, retirement plans manager, trainer, training manager, compliance consultant, technical help desk manager and writer.
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