Borrowing Against Roth IRA?

[Kyle Kline]

I have heard on several separate occasions about the idea of "borrowing against an IRA" to build funds for investing, but am unable to find any more information about this when I search for it. Does anybody have any knowledge or experience with this? Thanks!

[Brian Eastman]

@Kyle Kline

You cannot borrow from an IRA plan. It is possible to borrow from an employer plan like a 401(k).

Some people claim to "borrow" from an IRA by executing a 60-day rollover. You can take a distribution from an IRA, and so long as you return the funds to a qualified retirement plan within 60 days, the distribution is cancelled. If you miss the 60-day window, the funds are irrevocably treated as a distribution. This is allowed once per 12 months per taxpayer. I have seen more people torch their retirement plan using this "strategy" than I care to think about.

As @Chris Seveney notes, an IRA can be setup with a specialty self-directed custodian so the IRA can be invested in non-traditional assets like real estate. This is not a means for you to invest in real estate personally, and you cannot personally benefit such as by keeping the income yourself. Rather, your IRA can invest in real estate instead of being limited to investing in the stock market. If you think you can generate better performance for your IRA in real estate, this is something to explore.