borrowing money from margin account

Submitted by jacob roldan on Sat, 2017-04-08 18:15

My broker says when I retire, I can borrow money from my non-retirement account to cover expenses. In essence I’m borrowing money by using my IRAs as collateral. You said in your video that this is a BAD mistake when accessing money for retirement. Can you clarify this DONT?



Submitted by jacob roldan on Sat, 2017-04-08 18:19

I don’t personnaly like this idea because it doesnt specify what the interest rates are going to be and what effects this strategy has on IRA inheritance.

Submitted by William Tuttle on Sat, 2017-04-08 18:37

  • I think you must be misunderstanding the broker. Pledging an IRA as collateral would be a prohitbited transaction and require the full distribution of the IRA. I can’t believe any broker would suggest such a thing.
  • What is more likely is that the broker siggested using margin to borrow money from the taxable account which effectively uses the taxable account assets as collateral.
  • Now as to the wisdom of using margin rather than just selling some of the assets in the taxable account. I wouldn’t do it.
  • I suppose there could be some specific circumstances where it might make sense to defer the tax bill from selling the assets, by waiting until the next year. I would want to know the specific circumstances

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