You can borrow from your IRA, but only through a specific mechanism called a rollover loan, and only if your IRA is self-directed

A traditional or Roth IRA is not designed as a lending account. You cannot call your IRA custodian and ask to borrow $5,000 the way you would from a bank. However, the IRS does allow one narrow path: a 60-day rollover loan. You withdraw money from your IRA, use it for whatever you need, and deposit it back within 60 days. If you meet the important date, the IRS treats it as a rollover rather than a withdrawal, so you avoid income tax and the 10% early withdrawal penalty.

The catch is that you can only do this once per year, per account. If you have multiple IRAs, you can do one rollover loan per account, but the IRS counts all your IRAs as a single pool for this purpose — so if you have three IRAs and do a rollover loan from one, you cannot do another from any of them for 12 months. Many people do not know this rule exists, and many more do not know the 12-month clock resets only once yearly, not per account.

A second path exists for people with self-directed IRAs (IRAs held at custodians that allow alternative investments). These accounts can hold loans as an investment, meaning you can borrow from your own IRA as if it were a bank. This requires a promissory note, regular payments, and interest. It is more complex but does not trigger the 60-day important date or the once-per-year limit.

Key Takeaways

  • A 60-day rollover loan lets you withdraw from your IRA and redeposit it within 60 days without tax or penalty, but you can only do this once per year across all your IRAs combined.
  • If you miss the 60-day important date, the withdrawal becomes taxable income and you owe a 10% early withdrawal penalty if you are under 59½.
  • Self-directed IRAs allow you to borrow from your own account using a promissory note and regular payments, with no 60-day important date or annual limit.
  • Your IRA custodian must support rollovers for this to work — some custodians restrict or prohibit them, so check your account rules before you withdraw.
  • Borrowing from your IRA reduces the money compounding for retirement, so the real cost is the growth you lose over decades, not just the interest you pay.

How the 60-day rollover loan actually works

You contact your IRA custodian and request a distribution. The custodian sends you a check or transfers the money to your bank account. You now have 60 calendar days to deposit that exact amount back into an IRA — it can be the same IRA or a different one, but it must be an IRA, not a taxable brokerage account. The IRS counts the 60 days from the day you receive the money, not the day you request it.

During those 60 days, you can use the money for anything: rent, medical bills, a car repair, a business expense. There is no restriction on what you spend it on. The IRS only cares that the money comes back into an IRA within the window.

When you redeposit, you are not making a new contribution — you are completing a rollover. Your custodian will report this to the IRS on Form 1099-R. If everything is done correctly, the IRS sees no taxable event and no penalty applies. If you miss the 60-day important date by even one day, the entire withdrawal becomes taxable income in the year you withdrew it, and you owe a 10% penalty on top if you are under 59½. There is no grace period and no exception for "I forgot" or "the bank was slow."

The once-per-year rule and how it actually counts

The IRS allows one rollover loan per year, but the rule is stricter than most people think. It is not one per IRA — it is one per person, across all IRAs you own. If you have a traditional IRA at Fidelity, a Roth IRA at Vanguard, and a SEP-IRA at your bank, you still get only one 60-day rollover loan in any 12-month period, across all three accounts combined.

The 12-month clock runs from the date you received the previous distribution, not from January 1st. So if you did a rollover loan on March 15, 2024, your next one cannot happen until March 16, 2025. If you do a second rollover before that date, the second withdrawal is treated as a taxable distribution, not a rollover, and you owe income tax plus the 10% penalty.

The IRS changed this rule in 2024 to make it stricter. Before 2024, the rule was one rollover per account per year. Now it is one per person per year, across all accounts. If you did a rollover loan in 2023, check the exact date before you do another one in 2024.

Self-directed IRAs and borrowing with a promissory note

If your IRA is held at a custodian that allows self-directed investing — such as Rocket Dollar, Alto, or Directed IRA — you can set up a loan from your IRA to yourself. This requires a written promissory note that specifies the loan amount, the interest rate, the repayment schedule, and the term. The note must be a real contract, not a handshake agreement.

You then make regular payments back to your IRA, including interest. The interest you pay goes back into your IRA, so it compounds for retirement. This structure has no 60-day important date and no once-per-year limit — you can have multiple loans outstanding at the same time if your IRA balance supports it.

The downside is complexity and cost. You need a custodian that supports this feature, which usually means paying higher fees than a standard IRA. You may need a lawyer to draft the promissory note correctly. The IRS scrutinizes these loans, so the terms must be commercially reasonable — you cannot loan yourself money at 0% interest or with no repayment schedule. If the IRS decides the loan was not a real loan, it can reclassify the entire transaction as a prohibited transaction, which disqualifies your IRA and triggers when ready taxation of the entire balance.

What happens if you miss the 60-day important date

If you do not redeposit the money within 60 days, the withdrawal becomes a taxable 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. Some states add state income tax as well.

Example: You withdraw $10,000 from your traditional IRA on March 1 and forget to redeposit by April 30. You are 45 years old and in the 22% federal tax bracket. You owe $2,200 in federal income tax plus $1,000 in penalty, for a total of $3,200. If your state has income tax, add that too. You also lose the $10,000 from your retirement savings permanently.

The IRS does not grant extensions or exceptions for missed important date. If you realize on day 61 that you missed the window, you cannot undo it. You can file an amended return and claim the loss, but you still owe the tax and penalty. The only exception is if your custodian made an error — for example, if they failed to process your redeposit on time despite receiving it within 60 days. In that case, you can request a private letter ruling from the IRS, but this is expensive and takes months.

Checking whether your custodian allows rollovers

Not all IRA custodians permit 60-day rollover loans. Some, particularly at large banks, restrict or prohibit them. Before you attempt a rollover, contact your custodian and ask directly: "Does my account allow 60-day rollover loans?" Get the answer in writing or take note of the date and time you asked.

If your custodian does not allow rollovers, you cannot do a 60-day loan with that account. You would need to transfer your IRA to a custodian that does allow them — which itself takes time and may trigger a taxable event if not done correctly. Some custodians allow rollovers but charge a fee for the distribution, so ask about that too.

If you have a self-directed IRA, your custodian should have a process for setting up a promissory note loan. Ask them for the requirements, the cost, and a sample note. Some custodians handle this in-house; others require you to hire a third-party loan servicer.

The real cost: lost growth over decades

The tax and penalty are the visible cost of borrowing from your IRA. The invisible cost is the growth you lose. Money in an IRA compounds tax-free for decades. If you withdraw $10,000 at age 45 and do not redeposit it, that $10,000 would have grown to roughly $40,000 to $50,000 by age 65, depending on market returns. Even if you do redeposit it within 60 days, you have lost the growth during those 60 days — usually a few hundred dollars, but it adds up over a lifetime of small loans.

This is why borrowing from an IRA should be a last resort, not a first option. If you need short-term cash, a personal loan or a credit card cash advance is usually cheaper than the opportunity cost of raiding retirement savings. If you need long-term cash, a home equity loan or a 401(k) loan (if your employer plan allows it) may be better options because they do not have the same 60-day important date or once-per-year limit.

Frequently Asked Questions

Can I borrow from my 401(k) instead of my IRA?

Yes, and a 401(k) loan is often better than an IRA rollover loan. Most 401(k) plans allow you to borrow up to 50% of your vested balance, with repayment terms of up to five years (longer if the loan is for a home purchase). You pay interest, but the interest goes back to your own account. There is no 60-day important date and no once-per-year limit. The downside is that if you leave your job, the loan usually becomes due within 60 to 90 days, or it is treated as a taxable distribution.

What if I do a rollover loan and then lose my job before the 60 days are up?

Losing your job does not extend the 60-day important date. You still have until day 60 to redeposit the money, or it becomes taxable. If you cannot redeposit in time, you owe the tax and penalty. Some people in this situation take a loan from a bank or credit card to redeposit the IRA money on time, then pay back the bank loan over time. It is not ideal, but it preserves the IRA.

Can I do a rollover loan from a Roth IRA?

Yes, the 60-day rollover rule applies to Roth IRAs the same way it applies to traditional IRAs. The difference is that Roth withdrawals are not taxable (you already paid tax on the money going in), so you do not owe income tax if you miss the important date. You still owe the 10% penalty if you are under 59½, and you still lose the tax-free growth. The once-per-year rule applies across all your IRAs, including Roths.

If I do a rollover loan, do I have to redeposit the exact same amount?

Yes, you must redeposit the exact amount you withdrew. If you withdrew $10,000, you must redeposit $10,000. If you redeposit only $9,500, the missing $500 is treated as a taxable distribution and you owe tax and penalty on it. You cannot make up the difference with a new contribution — the rollover must be dollar-for-dollar.

Can I do a rollover loan if I am retired and taking distributions from my IRA?

Yes, but it is more complicated. If you are already taking required minimum distributions (RMDs) from a traditional IRA, a rollover loan counts as a distribution for RMD purposes. You need to make sure the rollover does not cause you to take more than your RMD in that year, or you may owe an excess distribution penalty. Talk to a tax professional before you do a rollover loan if you are over 73 and taking RMDs.