moving money from Simple IRA to Roth IRA
Hello Alan et al,
We have a client who is interested in moving money from a Simple IRA into a Roth IRA prior to April 18th.
1. Is it possible to recharacterize a Simple IRA 2021 salary deferral contribution into a Roth IRA 2021 contribution? My understanding it that he cannot.
2. Am I correct in that, if he withdraws the Simple IRA 2021 salary deferral contribution to turn around and make the contribution into his Roth IRA, there would be a 10% penalty because that doesn’t meet one of the exceptions to the 10% penalty?
2. In order to move Simple IRA money into his Roth, would he have to convert the Simple IRA balance that he’s had for >2 years into his Roth IRA which wouldn’t count as a contribution and wouldn’t need to be done by April 18th?
Thank you,
Chris
Permalink Submitted by William Tuttle on Thu, 2022-04-07 22:25
You can only recharacterize a traditional IRA to a Roth IRA and vice versa. Not to mention, as of now there are no SIMPLE IRA designated Roth accounts.
The tax code and IRS regulations prohibit the in-service withdrawal/rollover of employee deferrals prior to age 59 1/2.
It is the entire account that is subject to the two (2) year rule. If it has been >= 2 years since the first contribution, all of the employer contributions/earnings and only the employer contributions/earnings could be rolled over prior to age 59 1/2.