Simple IRA – 2 Year Rule

For Simple IRA purposes.

Client age 62.  Starts new Simple IRA Retirement Plan.

Typically during the first 2 years of account establishment, the 10% early withdrawal penalty/ transfer rule applies.  In this case where the client is already over 59.5, I just want to verify there is no additional penalty if funds were removed for any reason during that initial 2 year period.  Thanks for your clarification.



If client had been under 59.5, the early distribution penalty in the first 2 years of the SIMPLE IRA would have been 25%, not 10%. However, being over 59.5 there is no early distribution penalty at all.

That said, a distribution within the first 2 years is also NOT eligible for rollover, so if the client intends to do a rollover to any type of retirement account other than another SIMPLE IRA, the distribution could not be rolled over and would be taxable (but no penalty).

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