How to Borrow From an IRA

• 1). Take a short-term loan. The only way you can borrow money from your IRA is through a short-term loan that you repay within 60 days. So plan ahead for how quickly you can repay the money. If you take longer than 60 days, you will have to pay a 10-percent early withdrawal penalty.
  
  
• 2). Rollover your IRA. Ask your current IRA administrator for a check for the amount you need to borrow. Once the money is withdrawn from the account, you have 60 days to repay the entire amount and have it classified as a rollover rather than an early withdrawal.
  
  
• 3). Use the money. The IRS will take 20 percent of what you ask for in withholding so keep that in mind when you request an amount. You'll be able to get it back when you file your taxes, but you will need to repay the entire amount you asked for within 60 days.
  
  
• 4). Repay the money within 60 days. To avoid having your loan become an early withdrawal, make sure you pay back the full amount you requested from your account and not just the amount you received. For instance, if you ask for $50,000 from your account, you will get a check for $40,000. To avoid the early withdrawal penalty, you will need to repay $50,000 in 60 days.
  
  
• 5). Make a penalty-free withdrawal. If you want to keep the money from your IRA and not repay it, there are certain types of penalty-free withdrawals you can make. Use the money for a first-time home purchase (up to $10,000), college tuition, hardship circumstances, early retirement, substantially equal annual amount payments, excessive health insurance premiums and medical expenses. These will not be loans from your IRA, though. They do not have to be repaid and they will substantially reduce your retirement savings.