You may take a loan from your traditional IRA if you need money and meet certain conditions. To take a loan from your IRA, you must:
1. Be a participant in the IRA plan.
2. Have an outstanding loan balance in the plan of no more than $50,000.
3. Have made all required loan repayments on time.
4. Not have taken any other loans from the plan in the past 12 months.
If you meet these conditions, you may take a loan from your IRA. The loan must be repaid within five years, with interest. The interest rate is set by the IRA plan, but may not be less than the prime rate plus one percent.
If you do not repay the loan, the unpaid balance will be treated as a distribution from the IRA. You will have to pay taxes on the distribution, and if you are under age 59½, you may also have to pay a 10% early withdrawal penalty.
Before taking a loan from your IRA, be sure to consider the consequences. Taking a loan from your IRA should be a last resort, and you should be sure that you can repay the loan on time.
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