How to Access Funds From Your Roth IRA: Withdrawals and Rollovers

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You can’t take out a loan against a Roth IRA. Federal tax law has no loan provision for IRAs of any kind, and borrowing from the account or pledging it as collateral is a prohibited transaction. You can still get cash out in two ways. You can withdraw your original contributions at any time without tax or penalty, or you can use a 60-day rollover, taking money out and putting it back into the same or another Roth IRA within 60 days. Earnings taken out early are a different matter. They can trigger income tax and a 10% penalty.

Why a Roth IRA has no loan option

Workplace plans such as 401(k)s can offer loans because the law specifically allows them. IRAs have no equivalent rule. Borrowing from your IRA is a prohibited transaction: the account stops being an IRA as of the first day of that year, and the entire balance is treated as distributed.

Using the account as security for a loan from someone else is also off-limits. If you pledge part of a Roth IRA as collateral, that pledged portion is treated as a distribution. This is why you can’t take a margin loan against a Roth IRA to get cash out, and why a securities-based line of credit (SBLOC) is not available on IRA assets. Some brokers offer “limited margin” in IRAs, but that only lets trades settle faster. It does not lend you money you can withdraw.

Option 1: Withdraw your contributions

Roth IRA contributions aren’t tax-deductible when you make them. In exchange, the IRS lets you take them back whenever you like. Your direct contributions can come out at any age and at any time with no tax and no 10% penalty.

The IRS applies ordering rules to every Roth IRA distribution, and those rules work in your favor:

1. Regular contributions come out first.
2. Conversion and rollover contributions come out next, oldest first. Each conversion has its own five-year clock for the 10% penalty if you’re under 59½.
3. Earnings come out last.

All of your Roth IRAs are treated as one account for this purpose. So if you’ve contributed $30,000 over the years, the first $30,000 you withdraw is contributions, regardless of which Roth IRA it comes from or how the investments have performed.

The catch is that withdrawn contributions can’t simply be put back. Outside the 60-day rollover window, the only way to get money back into a Roth IRA is a new annual contribution, subject to the yearly limit and the earned-income requirement. Taking out $15,000 of contributions can permanently shrink the tax-free portion of your retirement savings.

Earnings are fully tax-free only in a qualified distribution. That requires the five-year rule to be met, meaning at least five tax years since your first Roth IRA contribution. It also requires one of the following:

• You’re at least 59½.
• You’re disabled.
• The money goes toward buying, building or rebuilding a first home, up to a $10,000 lifetime limit.
• The distribution is made to a beneficiary or your estate after your death.

Option 2: Use a 60-day rollover as a short-term loan

The IRS lets you take a distribution of some or all of your Roth IRA and avoid tax as long as you deposit the same amount into the same Roth IRA or another one within 60 days. In practice this gives you a short-term, interest-free loan from yourself.

The rules that matter:

• The money has to come to you. An indirect rollover, where the custodian pays you and you redeposit, starts the 60-day clock. A direct rollover, also called a trustee-to-trustee transfer, moves money between institutions without you touching it, so it doesn’t give you any cash.
• One rollover per 12 months. You can do only one IRA-to-IRA indirect rollover in any 12-month period. The limit covers all of your IRAs combined, traditional and Roth together. The period starts on the date you receive the distribution, not on January 1. Roth conversions and trustee-to-trustee transfers don’t count against it.
• No dollar cap. The rollover amount isn’t limited, but you must redeposit the amount you took out.
• Day 61 is too late. The deadline counts calendar days from receipt. The IRS can waive it in limited circumstances, such as a financial institution’s error, serious illness or a death in the family, and it has a self-certification procedure for some of those reasons. You can’t count on a waiver because you simply ran short of cash.

If you return only part of the money, the unreturned portion is treated as an ordinary distribution. The ordering rules then decide its tax treatment. If the unreturned amount is covered by your contributions, it’s tax-free and penalty-free. If it reaches into earnings, that part may be taxed and hit with the 10% penalty unless an exception applies.

Example

This is a hypothetical case. Dana is 45 and opened a Roth IRA nine years ago. She has contributed $20,000, and the account is worth $28,000, so $8,000 is earnings. She needs $25,000 for about six weeks while waiting for a home sale to close.

• Scenario A: full repayment. Dana takes $25,000 as an indirect distribution and redeposits $25,000 on day 50. Nothing is taxable. She can’t do another indirect IRA rollover until 12 months after the date she received the money.
• Scenario B: partial repayment. She redeposits only $20,000. The $5,000 she keeps is a distribution. Because she has $20,000 of contribution basis, the $5,000 counts as contributions under the ordering rules. She owes no tax or penalty, but her contribution basis drops to $15,000 and the money can’t be put back except through future annual contributions.
• Scenario C: no repayment. She keeps the full $25,000. The first $20,000 is contributions and tax-free. The remaining $5,000 is earnings. She’s under 59½ and doesn’t qualify for an exception, so the $5,000 is added to her taxable income and she owes a $500 penalty (10% of $5,000).

When early withdrawals of earnings avoid the penalty

If you need more than your contributions and can’t repay within 60 days, an early withdrawal of earnings is usually subject to the 10% additional tax. Federal law carves out exceptions. Common ones that apply to IRAs include:

• Unreimbursed medical expenses above 7.5% of adjusted gross income
• Health insurance premiums paid while unemployed
• Qualified higher education expenses
• A first-time home purchase, up to $10,000 lifetime
• A qualified birth or adoption, up to $5,000 per child
• Total and permanent disability
• A series of substantially equal periodic payments
• An IRS levy on the account

Starting in 2024, SECURE 2.0 also allows a penalty-free emergency personal expense distribution of up to $1,000 per year.

An exception removes the penalty, but it doesn’t make the earnings tax-free. Unless the distribution is qualified, earnings are still taxed as ordinary income. The first-home exception is the one case where an under-59½ owner with a Roth IRA older than five years can take up to $10,000 of earnings entirely tax-free.

Borrowing from a Roth 401(k) instead

If what you really want is a loan you repay over time, look at a workplace plan. A Roth 401(k), like a traditional 401(k), is governed by plan loan rules rather than IRA rules. Loans are possible if your employer’s plan permits participant loans. Federal limits generally cap a plan loan at the lesser of $50,000 or 50% of your vested balance, with repayment within five years unless the loan is used to buy a primary residence.

You do pay interest on a 401(k) loan, but you pay it back into your own account rather than to a lender. Repayments usually come out of your paycheck. If you leave the job or default, the outstanding balance can be treated as a distribution, with the tax and penalty consequences that go with it. A rollover Roth IRA is still an IRA, so moving money from a Roth 401(k) into a Roth IRA gives up the loan option.

Other ways to raise cash

The 60-day window is short. If your repayment timeline is longer or uncertain, other kinds of credit may cost less than permanently giving up tax-free growth:

• Home equity loan or HELOC. If you have enough equity, these loans are secured by your home. Their rates can be lower than credit cards or unsecured lines, and repayment terms run years rather than weeks. The trade-off is that your home is the collateral.
• Personal loan. Because it’s unsecured, the rate is generally higher than on a mortgage or auto loan, but the term is longer than 60 days. Compare the total interest over the period you actually need against the tax, penalty and lost growth of a Roth withdrawal you might not replace.

FAQs

The Bottom Line

Roth IRA owners who need cash have two clean routes: withdrawing contributions or completing a 60-day rollover in full. Withdrawn contributions generally can't be put back, and earnings taken early can bring income tax plus a 10% penalty. When repayment could take longer than 60 days, a Roth 401(k) loan, home equity credit or a personal loan may cost less than giving up tax-free growth permanently.