The 60 day IRA rule

Question: This past quarter, I made a series of small withdrawals from my IRA to keep the mortgage and other bills paid. I returned the first draw within the 60 day period, but when I went to return the second I was told I could only do 1 "rollover" per year! Help! How do I get my money back in without the penalty? The irony is that I am only 4 months from being 59.5 yrs. old. Chris, Gypsum, CO.

Answer: Ouch. It's a little known rule, but you can take money out of your traditional IRA penalty-free and tax-free so long as you put it back within 60 days. In essence, you're making an interest free loan to yourself for a brief period of time. The 60 day limit is strict. If you're under 59 ½ and you don't get the money back within the 60 day time period you'll owe taxes on the withdrawal and a 10% penalty. The other restriction is that you can only do this only once within any 12-month period. I don't see any way around it.

This article from Investopedia lays out some exceptions, but I doubt you qualify. Still, it offers a lot of good detail.

About the author

Chris Farrell is the economics editor of Marketplace Money.

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