Using a 60-Day IRA Rollover to Bridge a Home Purchase Carries Real Risk

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A listener near 65, with about $2 million in retirement accounts (roughly $1.2 million in a traditional IRA and $800,000 in a Roth), asked about taking a 60-day rollover — a rule that lets you withdraw money from an IRA or Roth IRA and redeposit it within 60 calendar days without taxes or penalty — to fund a $600,000 home purchase in a hot market before her current home sells. Jim Saulnier and Chris Stein said this strategy is attempted often and fails often: if the 60-day deadline is missed for any reason, the full withdrawal from a traditional IRA becomes taxable income in that year, generating a massive tax bill and a temporary spike in IRMAA surcharges — the income-related premium add-ons that Medicare charges higher earners. Their preferred path: use the Roth IRA instead of the traditional IRA. With $800,000 in the Roth and the listener over age 59½ with a Roth more than five years old, the full $600,000 can be withdrawn completely tax-free. If the 60-day clock runs out and the money is not redeposited, the only real consequence is a smaller Roth balance — not a tax event. Proceeds from her existing home sale could then be used gradually for Roth conversions (moving money from a traditional IRA into a Roth, paying tax at the time of conversion) during the window between now and when her Social Security at 70 and required minimum distributions (RMDs — mandatory annual withdrawals the IRS requires from traditional IRAs starting at age 75) begin, potentially at low tax rates.