There is a little-known loophole that will allow you to take a 60 day loan from a traditional IRA without paying any type of taxes or penalties. Though most people will tell you that there is not a way to take a loan from an IRA. Technically they are right. The tax law simply for bid you from borrowing money from your IRA. However that same tax law allows YouTube rolled your IRA funds over from one account to another. The IRS recognizes that this may take some time and they give you 60 days to complete the transaction. Those 60 days can work as a 60 day loan from your IRA funds. This isn’t necessarily a recommended financial transaction and you must be very careful to understand the consequences of your actions if attempting this. However, it is an option and is something you should know about particularly if you are looking at deals that require large sums of cash that you do not have available in any other accounts outside of your individual retirement account.
When looking at borrowing money from your IRA for this 60 day period you need to make sure you understand the rules about giving the money back into an IRA account. When you withdraw the money from one IRA the clock starts ticking. You need to have another IRA ready to deposit the money in and you can’t have any type of mess up that will push you over the 60 day limit. For example if you incorrectly calculate when holidays fall, your broker sec, the check gets delayed a day in the mail, or you have an accident you could be liable for up to 45% in taxes and penalties for not having the money back in an IRA on time.
The worst thing you could do is wait until Day 60 in order to start trying to open an IRA account. A better strategy would be to have the to count open in ready to fun. That way on day 58 you can put the money back in. This gives you a few days leeway in case something takes longer to process and also ensures that the account is already open so there are no delays on that side of things. Also you will probably need to open the irony of account with a different financial institution. In some cases you may be able to open another account at the same institution but rules vary and you need to make sure you can open the account. Like you said you don’t want to get today for 60 and try to open account only to find out you need to go to a different bank that happens to be closed on that day, etc.
let me stress again that this is not a recommended financial transaction. It is something that is possible but use usually a very very bad idea. Most people who are looking at borrowing money from your IRA funds you really need to rethink things.
First of all, the chances of you not being in financial stress in 60 days are probably slim. Taking the money of the IRA may increase your financial troubles because not putting the money back in time will mean that you stand a good chance of owing the government a huge amount of money. If you’re having problems with creditors now, he deftly don’t want to I had the IRS to the list of people who are after you.
Second, retirement funds are usually protected during bankruptcies. If you leave the money in the IRA it will still be available to you if you do go through bankruptcy. However, if you take the money out and use it on other things and then go through a bankruptcy you’ll lost all that money and the IRS will be after you forward the taxes and penalties on the money withdrew. This means you’ll be in a seemingly worse position than he would’ve been had he left the money in the IRA.
Now of course if you think you can turn your financial situation around in 60 days this type of loan from your IRA may look attractive. However you’d have to be very honest with yourself and understand the chances of you turn yourself around financially. You’ll be taking an extremely large risk and you need to make sure that you understand the odds.