Can you borrow from an IRA?

If you have a 401(k) plan, it might make sense to have an IRA account. You can also open an IRA to consolidate all your old 401(k)s to simplify the work of managing your retirement assets. In certain circumstances, you may be allowed early access to your IRA funds either as an early withdrawal or a loan.

While it is technically impossible to borrow from your IRA, Beagle allows IRA owners to take a loan against their retirement savings. Once you transfer your IRA to a Beagle account, you will be allowed to borrow up to 50% of your account balance at 0% net interest. Any loan payments go back to your Beagle account to continue growing your retirement savings.

How to Borrow from an IRA

While IRAs do not offer loans to IRA account owners, Beagle gives you a good option. To borrow against your IRA funds, you must open an account on meetbeagle.com where you will transfer your IRA funds to.

Once you transfer the IRA funds to your Beagle account, you can borrow up to 50% of your IRA account balance. You can borrow from your IRA to pay college expenses, medical expenses, or when buying your first home. You have up to 5 years to repay the loan, and any loan payments will be made back to your account to keep growing your retirement savings.

Can I borrow from my IRA for 60 days?

If you are looking for a short-term loan, you can take advantage of the 60-day IRA rollover. The IRS allows retirement savers to rollover their retirement savings from one IRA account to another IRA, Roth IRA, or another retirement account.

You can choose an indirect rollover, where the IRA provider sends you a check with your money, which you must deposit in another IRA or other retirement account within 60 days. The IRA may withhold 10% of your money for paying taxes.

During the 60-day period, you can use the funds to meet your short-term needs as long as you deposit the funds in full within 60 days from the date of withdrawal. If the IRA provider withheld 10%, you must come up with the amount in full, including the 10% withheld amount, by the end of the 60 days.

If you are unable to pay the amount withdrawn within the 60 days, you risk paying income taxes on the money, in addition to a 10% early withdrawal penalty.

How much can you borrow from an IRA?

If you transfer your IRA money to a Beagle account, you can borrow up to half of your retirement savings, up to a maximum of $50,000. For example, if your account balance is $80,000, you can borrow up to $40,000.

You will be required to pay the loan over a five-year period in equal installments. However, if you get a large payment during the repayment period, you can pay a lump sum amount to clear the outstanding balance without owing a prepayment penalty.

Alternatives to Borrowing from IRA

IRA withdrawal

You can decide to take a distribution from your IRA to meet your needs. However, you will pay income taxes on the distribution, and a potential penalty if you are below age 59 ½. You won’t be required to repay the withdrawn amount, but it will derail your retirement goals.

Borrow from 401(k)

If you have a workplace retirement plan like 401(k) and the employer allows loans, you may be allowed to take a 401(k) loan against your savings. Generally, you can borrow up to 50% of your vested balance, up to a maximum of $50,000. You can borrow from your 401(k) to pay college expenses, roof replacement, or when buying your first-time home. The loan payments are paid back to your retirement account.

Roth IRA

If you have a Roth IRA, you may be able to access the funds you need without paying taxes. Any contributions made to a Roth IRA can be withdrawn without paying taxes and penalties at any time before or after retirement. However, withdrawing retirement savings before reaching retirement age could jeopardize your retirement goals.

Look elsewhere

If you want to keep your 401(k) money untouched, you may decide to look elsewhere for a loan. You can decide to take a credit card loan or a personal loan from a bank or peer-to-peer lending services to meet your needs. However, you should expect to pay higher interest on the loan than what you would have paid with a 401(k) loan or IRA loan.