SIMPLE IRA Withdrawals and Transfers
You generally have to pay income tax on any amount you withdraw from your SIMPLE IRA. In some instances, you may also have to pay additional taxes. Here are some rules to keep in mind.
Unless you qualify for an exception, you’ll have to pay an additional 10% tax on the amount you withdraw from your SIMPLE IRA. This additional tax increases to 25% if you make the withdrawal within 2 years from when you first participated in the SIMPLE IRA plan.
Exceptions to the additional tax
You don’t have to pay the additional 10% or 25% tax if:
- You’re age 59½ or older when you withdraw the money
- Your withdrawal is not more than:
- Your unreimbursed medical expenses that exceed 10% of your adjusted gross income (7.5% if you or your spouse is age 65 or older),
- Your cost for your medical insurance while you’re unemployed,
- Your qualified higher education expenses, or
- The amount to buy, build or rebuild a first home (up to $10,000)
- Your withdrawal is in the form of an annuity
- Your withdrawal is a qualified reservist distribution
- You’re disabled
- You’re the beneficiary of a deceased SIMPLE IRA owner
- The withdrawal is the result of an IRS levy
You may be able to transfer money in a tax-free rollover from your SIMPLE IRA to:
- another IRA (except a Roth IRA), or
- an employer-sponsored retirement plan (such as a 401(k), 403(b), or governmental 457(b) plan).
However, during the 2-year period beginning when you first participated in your employer's SIMPLE IRA plan, you can only transfer money to another SIMPLE IRA. Otherwise, you’re considered to have withdrawn the amount and you must:
- include the amount in your gross income, and
- pay an additional 25% tax on this amount (unless you qualify for an exception (see above)).
After the 2-year period, you can also roll over SIMPLE IRA money into a Roth IRA, but you must include it in your income.
- SIMPLE IRA Plan FAQs
- Exceptions to Tax on Early Distributions
- Publication 590, Individual Retirement Arrangements (IRAs)