borrowing money from non-retirement margin account
My broker says that I can borrow money from my non-retirement margin account and use my IRAs as collateral? He also says that its tax free until I use up my non-retirement account and then have to pull money out of my IRA. Is this accurate? What makes this tax free?
Permalink Submitted by Alan - IRA critic on Sat, 2017-04-15 20:54
The broker it totally incorrect, and pledging an IRA account as collateral for any loan is a prohibited transaction that will result in a taxable distribution from the IRA. Therefore at the moment such an agreement is signed, a taxable distribution from the IRA is triggered. You should be eligible for a margin loan from your taxable brokerage account without any consideration of the IRA balance, but there are limits to the amount of that margin loan.
Permalink Submitted by William Tuttle on Sat, 2017-04-15 23:13
Same question, different week, same answer, different respondent, case closed!