Can I borrow from an IRA without penalty?

Technically speaking – yes. The 60-day rollover rule applies to all types of IRAs. This rule allows you to withdraw assets from your IRA if you repay the full amount within 60 days. If the amount is rolled over within this period, the distribution (withdrawn amount) is not taxable or subject to the early distribution penalty (that you'd trigger if you were under age 59½.

Note: This is technically not a ‘loan’, but a provision that allows temporary use of IRA savings outside of your IRA. This is by definition, a ‘distribution’ and a ‘ rollover’ of the distributed amount.

Some reminders:

  • Generally, you can perform an IRA-to-IRA rollover only once during a 12-month period. According to a tax court ruling, all of your traditional IRAs are treated as one IRA for this purpose as of January 1, 2015. (Prior to this date, the IRS applied the rule separately to each of your IRAs involved in such a distribution/rollover.)
  • The same assets you withdraw must be the same assets that you roll over to your IRA. For instance, if you withdraw cash, you must roll over cash.
  • Only eligible amounts can be rolled over.

This question was answered by Denise Appleby
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