Technically, you can’t borrow money from a Roth IRA, at least not like you would from a traditional loan, but there are other options. The IRS does allow you to withdraw money from your Roth IRA, but you might have to pay a penalty. There is a way to work around the IRS’s requirements if you only need to borrow money for a short period of time by rolling over the money that’s in your account. With both options, you'll need to visit the financial institution that handles your Roth IRA and fill out the proper paperwork in order to get your money.

According to the IRS, you can withdraw — tax free — some or all of the money in your Roth IRA as long as you invest the money back into the same Roth IRA or into a traditional IRA within 60 days. This is called a Roth IRA rollover. If you can't repay the full amount within 60 days, you do have the option to repay a partial amount. However, you'll have to pay a 10% penalty on the portion of the money that you keep, and there is a one-year waiting period between rollovers. The waiting period begins when you receive your distribution — not when you pay the money back.

If you need to use the money in your Roth IRA and won’t have the funds to repay it within 60 days, you can make an early withdrawal. As of 2019, most early withdrawals are subject to a 10% penalty. However, if you request a qualified distribution you can withdraw money from your Roth IRA without paying the 10% penalty if it’s been more than five years since you set up and contributed to your Roth IRA, including:

• The distribution is being used to buy or build your first home

• You’re at least 59.5 years old at the time of the distribution

• If you’re making an early withdraw because you've recently become disabled

Advisor Insight

Rebecca Dawson
Silber Bennett Financial, Los Angeles, CA

Loans are not allowed from IRAs or IRA-based plans such as SEPs, SARSEPs and SIMPLE IRA plans. Loans are allowed from qualified plans that satisfy the requirements of 401(a), annuity plans that satisfy the requirements of 403(a)s or 403(b)s, and governmental plans.

That said, the principal amount of a Roth IRA may be withdrawn without any tax consequence because you have already paid taxes on those funds. You may also borrow the principal from a Roth IRA, but the amount that your IRA has appreciated is not available for withdrawal without paying certain types of taxes and fees.

There are also exceptions, such as when you convert the funds from a traditional IRA into a Roth IRA, then the converted amount may not be available for penalty-free withdrawal for five years.