Can You Borrow From a Roth IRA?

No — a Roth IRA cannot lend to its owner. Borrowing from it can disqualify the entire account under IRC §408(e)(2); pledging it as collateral treats the pledged portion as distributed under §408(e)(4). The resulting tax depends on the Roth distribution rules, not automatically on the full balance. A different option is an ordinary withdrawal: amounts up to your remaining regular-contribution basis come out tax- and penalty-free at any age.

The Bottom Line

Three Code sections control the answer. Read together they say: you cannot borrow from an IRA, you cannot pledge one as collateral, but you can withdraw your own Roth contributions whenever you want with no tax and no penalty.

• IRC §408(e)(2) — if you engage in any prohibited transaction (defined in §4975), the IRA loses its IRA status as of January 1 of that year. Borrowing from your own IRA is squarely a prohibited transaction.
• IRC §408(e)(4) — if you use the IRA as security for a loan, the pledged portion is treated as distributed.
• IRC §408A(d)(4) — the Roth-specific ordering rules deem any distribution to come first from contributions, then from conversions, then from earnings. Contributions out are never taxed and never penalized.

A Roth contribution withdrawal and a plan loan are different transactions. This guide explains their rules and tradeoffs without assuming which one fits your circumstances.

Why the Code Prohibits IRA Loans

IRC §408(e)(2) reads (operative language):

If, during any taxable year of the individual for whose benefit any individual retirement account is established, that individual or his beneficiary engages in any transaction prohibited by section 4975 with respect to such account, such account ceases to be an individual retirement account as of the first day of such taxable year.

The statute references IRC §4975 (prohibited transactions), which lists transactions between an IRA and a “disqualified person.” The IRA owner is always a disqualified person. A loan from your IRA to yourself is the textbook example.

The account-status consequence is severe: the entire IRA is treated as distributed at its value on the first day of the year. If the January 1 balance was $200,000 and the owner takes a $5,000 prohibited loan in November, the deemed distribution is $200,000 — not just $5,000. That does not automatically mean $200,000 of taxable income from a Roth IRA. Qualified-distribution rules, remaining contribution and conversion basis, and applicable additional-tax rules determine the taxable result. Losing the tax-advantaged account remains a serious consequence.

A promise to repay does not turn a prohibited IRA loan into an allowed plan loan. If a prohibited transaction may already have occurred, get qualified tax help before attempting a correction or treating a redeposit as a valid rollover.

The Collateral Trap (§408(e)(4))

A common variation: pledging the IRA balance as security for a loan from a third party (not from the IRA itself). The lender doesn’t need to actually take the money — the pledge alone is enough to trigger consequences. IRC §408(e)(4) reads:

If, during any taxable year of the individual for whose benefit an individual retirement account is established, that individual uses the account or any portion thereof as security for a loan, the portion so used is treated as distributed to that individual.

Three things to notice:

• Only the pledged portion is treated as distributed — the rest of the IRA stays an IRA. This is meaningfully better than §408(e)(2) (which disqualifies the entire account), but the deemed-distribution treatment still applies to whatever you pledged.
• The pledge itself is the trigger — not the eventual default or non-payment. The act of signing the security agreement is what creates the deemed distribution.
• Repayment is a separate question. Paying the lender back does not make the original pledge an ordinary tax-free IRA loan. The distribution and any possible remedy need separate review.

The practical distinction: an IRA loan can disqualify the whole account; a pledge triggers distribution treatment for the portion used as security. Neither is the same as a permitted workplace-plan loan.

What You CAN Do: Withdraw Your Contributions

This is the answer most people searching for “Roth IRA loan” actually need. IRC §408A(d)(4) establishes the ordering rules that make Roth IRAs uniquely flexible:

[Distributions] shall be treated as made—(i) from contributions to the extent that the amount of such distribution, when added to all previous distributions from the Roth IRA, does not exceed the aggregate contributions to the Roth IRA; and (ii) from such contributions in the following order: (I) Contributions other than qualified rollover contributions...; (II) Qualified rollover contributions...on a first-in, first-out basis.

Translation:

1. Direct contributions come out first. Always tax-free (you already paid tax before depositing). Always penalty-free regardless of age. Always — no 5-year clock, no qualified-distribution test, no exceptions list to navigate.
2. Conversions come out next, oldest first. Within each conversion year, the taxable portion comes out before the nontaxable portion. A withdrawal within the separate five-tax-year conversion period can trigger the 10% additional tax on amounts taxable when converted, unless an exception applies. Conversion principal is not taxed as income again.
3. Earnings come out last. They are tax-free if the withdrawal is qualified. Otherwise they are generally taxable, and the 10% additional tax can apply unless an exception applies. An exception to that additional tax does not by itself eliminate income tax.

Start with your remaining contribution basis, not the total you have ever deposited. Earlier withdrawals and other adjustments matter. Keep contribution confirmations, Forms 5498, conversion records and prior withdrawal records across your own Roth IRAs. A nonqualified contribution-only withdrawal generally still requires Form 8606 Part III, even when no income tax is due; see withdrawal reporting.

The 60-Day Rollover Is Not a Loan (and Treating It Like One Is Risky)

A misconception that pre-dates the modern internet: people sometimes treat the 60-day rollover provision as a 60-day “loan” from their own IRA. It isn’t one, and using it that way is high-risk.

An eligible IRA distribution can generally be rolled over within 60 days of receipt. A Roth IRA distribution can roll only into a Roth IRA. Eligibility, destination-account rules and the one-per-12-month limit still matter; meeting the deadline alone is not enough. A rollover is not a participant loan with a multi-year repayment schedule.

Three constraints make the “60-day loan” framing dangerous:

• One eligible IRA-to-IRA indirect rollover per 12 months. The limit aggregates your IRAs and runs from receipt of the distribution. Trustee-to-trustee transfers, Traditional-to-Roth conversions and plan-to-IRA or IRA-to-plan rollovers are not counted. An ineligible redeposit can create an excess contribution. See the rollover guide.
• Count from receipt, not the date you cash a check. Arrange completion before the deadline. Rev. Proc. 2020-46 permits self-certification for specified reasons, but the letter is not an IRS waiver and the IRS can later reject the claim.
• The mandatory 20% employer-plan rule does not apply to IRA payments. Other IRA withholding can still apply. To roll over the entire eligible distribution, replace any amount withheld or spent. If $20,000 comes out of a Roth IRA and only $15,000 is validly rolled back, the remaining $5,000 follows Roth distribution rules — it is not automatically taxable or penalized.

Bottom line: the 60-day rollover is a mechanical tool for moving money between IRAs, not a financing strategy. Treating it as a loan is how taxpayers end up with surprise tax bills.

401(k) Loans Are Different (and IRAs Cannot Replicate Them)

A 401(k), 403(b), or governmental 457(b) plan may offer participant loans under IRC §72(p). The plan must actually allow them; an IRA cannot. Key rules include:

• Maximum loan: generally the lesser of $50,000 or half the vested balance. An optional small-balance exception can allow up to $10,000 even when that exceeds half the vested balance. Existing loans and the prior 12 months’ highest outstanding balance can reduce the available amount; plans can impose stricter limits.
• Repayment term: generally five years, with substantially equal principal-and-interest payments at least quarterly. A loan to purchase a principal residence can have a longer term. Loan repayments are not new plan contributions.
• Interest and fees: check the plan’s rate, fees and repayment terms. Paying interest into the account does not make borrowing cost-free.
• Plan-sponsor optional: the IRC permits plans to offer loans; not all do. Check your plan’s SPD.
• Leaving a job does not automatically settle the tax question. A plan may require faster repayment after employment ends. A missed-payment deemed distribution and a plan loan offset have different rollover rules, explained below.

What this means for IRAs: if you rolled a former employer’s 401(k) into an IRA, the loan feature did not roll over with the assets. Only the principal moved; the IRC §72(p) authority to take loans applies only to qualified plans, not to IRAs. There is no version of the IRC that allows IRA loans, period.

Do not assume a former employer’s plan will make new loans or let an existing loan continue unchanged. Ask the administrator for the loan policy and the specific post-employment options.

Missed payments, offsets and the deadline that applies

A qualified plan loan offset arising from plan termination or qualifying failure to repay because of separation from employment can be rolled over by the federal tax-return due date, including extensions, for the year of the offset. Qualification has specific conditions: the loan must have satisfied the loan rules immediately before the relevant termination or separation; a separation-related offset must occur within 12 months of separation. Check the administrator’s classification. This extension comes from the Tax Cuts and Jobs Act, section 13613, not a general SECURE 2.0 cure rule.

For either type of distribution, income tax depends on previously untaxed amounts and applicable Roth or basis rules. The 10% additional tax is a separate question with exceptions; being under 59½ alone does not resolve every case. See the IRS plan loan offset guidance and loan FAQs.

Withdraw Roth Contributions vs. 401(k) Loan vs. Try to “Borrow”

These four transactions have different rules. A permitted plan loan is not interchangeable with a Roth withdrawal or a rollover, and an IRA loan or pledge is not a safe substitute.

The Hidden Cost of Withdrawing Contributions: Lost Compounding

A contribution withdrawal can be tax-free today while still reducing future retirement savings. To compare that cost fairly, count the missing dollars’ growth once — not again under a second label for lost contribution room.

Worked example. Sarah, age 28, has $30,000 of remaining regular-contribution basis and no prior withdrawals. She withdraws $15,000 for an expense. Income tax and additional tax on this contribution-only withdrawal: $0. Assume she leaves that $15,000 out until age 65 and makes exactly the same other contributions in both scenarios.

• Time outside the account: 65 − 28 = 37 years.
• At a hypothetical constant 7% annual return, $15,000 × 1.07³⁷ = about $183,354 of future balance.
• That includes the original $15,000 plus about $168,354 of growth. It is not inflation-adjusted, and 7% is an illustration, not a forecast or guarantee.

Under those assumptions, the age-65 Roth balance is about $183,354 lower. Do not add another “lost contribution capacity” amount to this same comparison. Replacing money sooner would change the result, but only an eligible new contribution, valid rollover or applicable special repayment rule can put it back.

This example measures one possible withdrawal cost, not the cost of every alternative. A plan loan has a repayment obligation, fees and risks of its own. Compare the actual terms and realistic cash flow before choosing a source of money.

When “Can I Borrow From My Roth IRA?” Is the Wrong Question

If you’re considering this path, three questions should come first:

1. What would a plan loan actually require? Check availability, fees, interest, repayment schedule and what happens if employment ends. There is no automatic “cheapest” answer.
2. How would money return to retirement savings? Separate an eligible rollover or special repayment from a new annual contribution. A withdrawal does not refill that year’s contribution allowance.
3. Are you reaching beyond remaining contributions? Conversion principal and earnings have different rules. A penalty exception may remove the 10% additional tax without removing income tax on nonqualified earnings.

Keep the legal distinction clear: an ordinary Roth withdrawal can be allowed, a workplace loan can be allowed under its plan terms, and a rollover can be valid if its own rules are met. None makes borrowing from or pledging an IRA a permitted plan loan.

Corrections and updates

September 19, 2026: Earlier wording treated default, job exit and offsets alike and incorrectly attributed a general cure extension to SECURE 2.0. We distinguished plan terms, non-rollover-eligible deemed distributions and eligible offsets, including the TCJA qualified-offset deadline. We also removed blanket Roth taxation claims, corrected rollover and repayment explanations, and replaced a double-counted growth example. Correction record.