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.
Permalink Submitted by Alan - IRA critic on Mon, 2025-06-02 12:03
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).