A person can borrow from their own IRA account to pay for education. But the government mandate

Answered by Shaykh Abdurrahman ibn Yusuf Mangera

In America we have a type of retirement account called an IRA (Individual Retirement Account). An IRA is useful because it allows one to invest in stocks without incurring tax penalties.

My question is this. A person can borrow from their own IRA account to pay for education. But the government mandates that one has to pay oneself interest when putting the “loaned” money back into the account. So essentially, you have to pay interest to yourself to do this.

Is it permissible to pay interest to oneself? Is that really riba, because it is really just the same person”s money, not going to anyone else, just transferring from one account to another?

Answer:

In the name of Allah, the Inspirer of truth.

Assalamu alaikum wa rahmatullah

It is permissible to transfer money from one of your personal accounts to your permissible IRA account, even though the financial institution may term this interest. You are essentially just giving money to yourself..

And Allah knows best.

Wassalam
Abdurrahman ibn Yusuf