Comments on: Borrow from your IRA

By: Mark Shead

Mark Shead — Mon, 30 Jan 2012 19:29:32 +0000

As far as I know, no. But I would check with a CPA to be sure.

By: Gina Pierce

Gina Pierce — Tue, 17 Jan 2012 22:25:50 +0000

I had a catastrophic illiness that my insurance did not cover. I had to use money from my IRA’s. Do I get any type of a break due to medical bills?

By: Mark Shead

Mark Shead — Fri, 02 Dec 2011 20:22:03 +0000

You are going to need to talk to a CPA about that. Generally money you put into a Roth is already taxed so if you take out the principle, you don’t create any type of taxable event. If I remember right, there are some exceptions where there may be some fees triggered. It seems (and I’m relying on my memory here) that this was most likely to happen if you rolled over a pretax retirement account into a Roth.

One thing you might look into (and another reason to talk to a CPA) is the provisions that allow you to reverse a Roth rollover. In some cases, people who did roll overs only to have the value of their accounts crash have some recourse in undoing the transaction and getting back some of the taxes that they paid to do the rollover. I don’t know what the time limit is to do something like that, but it is probably something you should ask about.

By: Jonathan

Jonathan — Wed, 30 Nov 2011 08:17:50 +0000

So this might be really basic question for most people, but when it comes to taxes I am lost. I cashed out my roth ira in ’09 as a result of severe financial crisis. I had taken quite a loss from the total I had invested (Roth was only 5 or 6 years old at the time). I figured I did not have to pay taxes on it because i LOST money. Do I pay taxes regardless? And does it matter that the money I was investing with was from an un-taxable annuity? Just received a bill from the IRS looking to recoup taxes and fees.

Regards

By: Mark Shead

Mark Shead — Thu, 20 Oct 2011 16:28:12 +0000

Talk to Merrill Lynch to see. I know that in some situations you can.

By: shawn

shawn — Wed, 19 Oct 2011 00:34:55 +0000

I have a 401k with Merrill Lynch. I lost my job but am now at a new. I still have the 401k but now my funds are now in mutual funds and other is cash about $23k which I would like to take a loan out against that or other money which is close to $200k. I an not currently in a 401k with my new job. Can I still barrow money and do the pay back option which I think is 5%over 5 years. I want to do it as I’m $30k in debt my other choice is to file for bankruptcy I need answers on both or if you can’t mainly barrowing the money.

By: Mark Shead

Mark Shead — Wed, 05 Oct 2011 03:37:07 +0000

You probably need to talk to a CPA just to be sure. Since you are past retirement age there may be other factors involved as well.

By: Boyd

Boyd — Tue, 04 Oct 2011 16:31:47 +0000

I am 78 years old and withdrew money from my IRA 3 times less than 60 days ago. I would like to repay that money. I had already reached my MWD several months ago.
The reason I want to pay it is so that my SS is not taxed as much as it would otherwise.
Can I repay that as long as I do so within 60 days? Does three withdrawals have any affect affect as long as I make the 60 day limit on all three?

By: Mark Shead

Mark Shead — Fri, 21 Jan 2011 22:33:36 +0000

You might be better off converting your IRA to a Roth and pay the taxes on it. Then you can get the original investment out without taxes or the 10% penalty. I’m not sure if there is any type of waiting period before you can get your original investment out, but you might check with a CPA to see.

By: Will

Will — Thu, 20 Jan 2011 04:44:33 +0000

I have been considering doing this. My case is that I’m a software contractor with fluctuating income stream. It’s very possible I could get the money in payments within the 60 days. I agree though it’s rather risky and it’s just an emergency plan for me.

By: Mark Shead

Mark Shead — Tue, 25 May 2010 21:31:07 +0000

I believe you can specify the amount you want to have withheld. Did that change recently? I agree that in most cases, trying to do something like this is very unwise. I've only heard of one or two times where it actually made sense to try something like this. Regarding the 401k/403b borrowing, I'm pretty sure it doesn't become immediately due if you lose your job as long as you continue to make the payments. I think the biggest risk is that you'll miss out on significant market growth.

By: Dale King

Dale King — Tue, 25 May 2010 17:22:41 +0000

VERY BAD ADVICE!!

Apparently you have not heard of mandatory withholding on IRA disbursements made directly to you. If the IRA custodian makes the check out to you they are required to withhold 20% of it for tax purposes.

So if you tried this rolling over $10,000 you would receive a check for $8000. You then have 60 days to deposit $10,000 into a new retirement account to avoid the taxes and penalty. So you have to then come up with $2000.

So where did the 20% go. If you do make the deposit adding in 20% of your own money then you will get that money back when you figure taxes for the year (i.e. April 15th of next year) so it ends up that you give the government an interest-free loan for the 20% amount.

The proper way to move retirement money is to do a transfer where the money either goes directly to the new custodian or if you get a check it is made out to the new custodian. In those cases no withholding is done.

See http://retireplan.about.com/od/taxes/a/mndtry_whldg.htm

And borrowing from your 401K is a bad idea as well. If you borrow and lose your job your loan becomes immediately due and payable or you will pay taxes and penalty on it.