60 day IRA loan to sell vehicle

[sliverstorm]

Just wondering if people have thoughts-

Selling our pickup truck, as it hardly gets used anymore and it's worth a good chunk of change. Been dragging out the loan & plowing money into retirement & savings instead because my interest rate is the same as my savings account interest rate. But now I need to come up with cash to pay off the loan to get the title for the best/easiest selling.

We're practically there, but a few hundred dollars short. I just learned you can take a 2-month loan from your IRA with no penalties from Uncle Sam, and I'm thinking that's probably the best source of short term cash to get the title in hand & sell (& put money back into IRA). We've got plenty of funds there, and hell, everybody says the market is bound to crash soon anyway... :)

Anyone have experience here? It occurs to me if my bank is a real stick in the mud, I could wind up getting the title in six weeks, and have only two weeks to sell before I need to refund the IRA. But aside from that and the opportunity cost of taking money out of the market, it seems pretty safe.

On the other hand, I could cancel some CD's at a cost of around $30 in early payout fees. That would keep more money invested in the market, at the price of guaranteed (albeit not that large) fees.

Maybe what this is boiling down to is- feeling lucky, punk?

[terran]

Just so you're clear, there's no such thing as a 60 day loan from an IRA. There is a rollover in which you can withdraw money from an IRA and as long as you put it back in an IRA within 60 days you'll pay no tax or penalty, so you can do what you're proposing, but it's not really intended as a way to take a loan.

People were abusing this provision on a pretty large scale by just constantly doing rollovers between IRAs so they always had some of the money that should have been in an IRA, so a few years ago a law was enacted that limits these rollovers to one per year (any rolling 12 month period, not a calendar or tax year), so just know that too.

All that said, as long as you make sure you deposit it back within 60 days, you can definitely do what you're proposing, just realize you're taking advantage of a loophole, not using the rollover provisions as they're intended.

[JLee]

You can sell a vehicle while financed.  The easiest way is to meet at your bank (that holds the title) for the transaction and then the bank can release the title to the new owner.

[Catbert]

Just so you're clear, there's no such thing as a 60 day loan from an IRA. There is a rollover in which you can withdraw money from an IRA and as long as you put it back in an IRA within 60 days you'll pay no tax or penalty, so you can do what you're proposing, but it's not really intended as a way to take a loan.

People were abusing this provision on a pretty large scale by just constantly doing rollovers between IRAs so they always had some of the money that should have been in an IRA, so a few years ago a law was enacted that limits these rollovers to one per year (any rolling 12 month period, not a calendar or tax year), so just know that too.

All that said, as long as you make sure you deposit it back within 60 days, you can definitely do what you're proposing, just realize you're taking advantage of a loophole, not using the rollover provisions as they're intended.

+1  Also I'm 99% sure that this loophole doesn't apply to Roth IRAs.  Once it's out of a Roth it's out forever.  (double check IRS website if yours is a Roth.)
It's important if you go this route to realize that it's a hard 60 days.  One day over and you can't put it back.  60 days isn't 2 months.  60 days even if the 60th day is Sunday or a holiday.  60 days, period.

[terran]

Just so you're clear, there's no such thing as a 60 day loan from an IRA. There is a rollover in which you can withdraw money from an IRA and as long as you put it back in an IRA within 60 days you'll pay no tax or penalty, so you can do what you're proposing, but it's not really intended as a way to take a loan.

People were abusing this provision on a pretty large scale by just constantly doing rollovers between IRAs so they always had some of the money that should have been in an IRA, so a few years ago a law was enacted that limits these rollovers to one per year (any rolling 12 month period, not a calendar or tax year), so just know that too.

All that said, as long as you make sure you deposit it back within 60 days, you can definitely do what you're proposing, just realize you're taking advantage of a loophole, not using the rollover provisions as they're intended.

+1  Also I'm 99% sure that this loophole doesn't apply to Roth IRAs.  Once it's out of a Roth it's out forever.  (double check IRS website if yours is a Roth.)

That's actually not true. The point of allowing 1 60 day rollover per year is so that you can move your IRA from one institution to another without doing a trustee to trustee transfer (I think these can involve fees from some of the less reputable trustees), so it wouldn't make sense to not allow it for Roth. See https://www.irs.gov/retirement-plans/ira-one-rollover-per-year-rule which specifically mentions Roth.

[Catbert]

Terran, Thanks for the correction.  That's what I get from relying on my memory.