You can borrow from your IRA, but only through a specific workaround—and you have to put the money back within 60 days or face taxes and penalties.
The IRS does not allow direct loans from IRAs the way banks allow loans against a 401(k). But there is a loophole called a 60-day rollover that lets you take money out and return it without triggering a taxable event—if you follow the rules exactly. You withdraw cash from your IRA, use it for whatever you need, and deposit it back into an IRA (yours or another) within 60 calendar days. If you miss that window by even one day, the IRS treats the withdrawal as a permanent distribution, and you owe income tax on the full amount plus a 10% early withdrawal penalty if you are under 59½.
This is not a loan in the traditional sense. You are not borrowing against your account; you are temporarily removing money and replacing it. The IRS allows you to do this only once per year across all your IRAs combined, and the clock starts the moment the money leaves your account, not when you receive it or when you decide to use it.
Key Takeaways
- A 60-day rollover lets you withdraw IRA money and redeposit it within 60 calendar days without tax consequences, but you can do this only once per year across all your IRAs.
- If you miss the 60-day deadline by even one day, the full withdrawal becomes taxable income and you owe a 10% penalty if you are under 59½.
- You must redeposit the exact amount you withdrew; you cannot keep part of it and return the rest.
- A 401(k) loan is a better option if your employer plan offers it, because you actually borrow against your balance and repay it over time without a strict deadline.
How the 60-day rollover actually works
You contact your IRA custodian (the bank, brokerage, or investment firm holding your account) and request a withdrawal. The custodian cuts you a check or transfers the money to your bank account. You now have 60 calendar days to deposit that exact amount into an IRA account—it can be the same IRA, a different IRA you own, or even a new IRA you open for this purpose.
The 60 days are strict. If your custodian mails you a check and it takes five days to arrive, you have 55 days left. If you deposit the money on day 61, the entire withdrawal is treated as a taxable distribution. The IRS does not grant extensions, and your custodian cannot override the rule. You are responsible for tracking the deadline yourself.
You must redeposit the full amount. If you withdrew $10,000 and only redeposit $8,000, the $2,000 difference is taxable income and subject to the 10% penalty. You cannot borrow part of your IRA and return part of it.
The once-per-year limit and how it is tracked
The IRS counts rollovers across all your IRAs combined. If you have a Traditional IRA, a Roth IRA, and a SEP-IRA, they are treated as one group for this rule. You can do one 60-day rollover per year, and the year runs on a 12-month calendar from the date of your first withdrawal.
If you do a rollover on January 15, you cannot do another one until January 16 of the following year. If you attempt a second rollover within that window, the second withdrawal is automatically treated as a taxable distribution, even if you return it within 60 days.
Your custodian does not always catch this violation automatically. You might not realize you have broken the rule until tax time, when you file your return and the IRS flags the error. By then, you owe back taxes plus the 10% penalty plus interest.
Why a 401(k) loan is usually better if you have one
If your employer offers a 401(k) and your plan includes a loan provision, borrowing from your 401(k) is simpler and safer than using the IRA rollover trick. You actually borrow money against your account balance and repay it through payroll deductions, usually over five years (longer if the loan is for a home purchase). There is no 60-day deadline, no once-per-year limit, and no tax penalty if you repay on schedule.
The interest you pay goes back into your own account, not to a bank. If you leave your job, you typically have 60 to 90 days to repay the loan in full or it becomes a taxable distribution, but that is a different rule and you have more time to plan.
The downside: you can usually borrow only up to 50% of your vested balance, with a cap of $50,000. And if you default, you lose the money you borrowed plus the growth it would have earned.
Taxes and penalties if you miss the deadline
If you do not redeposit the money within 60 days, the IRS treats the withdrawal as a permanent distribution. You owe federal income tax on the full amount at your ordinary income tax rate. If you are under 59½, you also owe a 10% early withdrawal penalty on top of the income tax.
Example: You withdraw $10,000 from your Traditional IRA at age 45. You miss the 60-day deadline. If your tax bracket is 22%, you owe $2,200 in federal income tax plus $1,000 in penalty, for a total of $3,200. You keep only $6,800 of the $10,000 you withdrew. State income tax may apply as well, depending on where you live.
The penalty is automatic. You cannot avoid it by paying the taxes on time. You must file Form 8606 with your tax return to report the non-may have access to distribution, and the IRS will calculate the penalty.
Roth IRA withdrawals and the pro-rata rule
If you have both a Traditional IRA and a Roth IRA, the pro-rata rule complicates things. When you withdraw from a Traditional IRA that contains pre-tax money, you can do a 60-day rollover without issue. But if you have any pre-tax IRAs (Traditional, SEP, or SIMPLE), and you withdraw from a Roth IRA, the IRS treats the withdrawal as coming proportionally from both pre-tax and after-tax money.
This means part of your Roth withdrawal may be taxable even if you return it within 60 days. The pro-rata rule is complex and often catches people by surprise. If you have both Traditional and Roth IRAs and are considering a rollover, talk to a tax professional before you withdraw.
What happens if you cannot redeposit in time
If you realize before day 60 that you cannot return the money, you have limited options. You cannot extend the deadline. You can attempt to redeposit as much as you can and accept that the shortfall will be taxable, but that does not reduce the penalty. You can also choose to treat the withdrawal as a permanent distribution and file your taxes accordingly, but that does not change the tax or penalty owed.
Some people in this situation take out a short-term loan from a bank or credit card to cover the redeposit, then repay that loan once they have the cash. It is expensive but avoids the IRA penalty. Others accept the tax hit and adjust their withholding or estimated tax payments to cover the liability.
Frequently Asked Questions
Can I do a 60-day rollover if I am already retired and taking distributions?
Yes, but the once-per-year limit still applies. If you are over 59½, you avoid the 10% penalty if you miss the deadline, but you still owe income tax on the full withdrawal. The 60-day window is still strict.
What if my IRA custodian loses the check or the transfer fails?
You are responsible for ensuring the money reaches your IRA account within 60 days. If the custodian's error causes a delay, you may be able to request a waiver from the IRS, but this is rare and requires filing Form 8329 with your tax return and providing documentation. Do not rely on this; use a direct transfer or certified mail if possible.
Can I do a 60-day rollover between a Traditional IRA and a Roth IRA?
Yes, but it is treated as a conversion, not a simple rollover. You owe income tax on the pre-tax money you move to the Roth, even if you complete the transfer within 60 days. This is different from a regular rollover and has different tax consequences.
Does the 60-day rollover count toward my annual contribution limit?
No. A rollover is not a contribution. You can do a 60-day rollover and still make your annual IRA contribution in the same year, as long as you have earned income to support it.
What if I need money for more than 60 days?
The 60-day rollover is not designed for long-term borrowing. If you need money for longer than two months, consider a personal loan, a home equity line of credit, or a 401(k) loan if your plan offers one. Taking money from your IRA and not returning it within 60 days defeats the purpose of retirement savings.