What are the Best Tips for a SIMPLE IRA Rollover?

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  • Written By: N. Madison
  • Edited By: Jenn Walker
  • Last Modified Date: 21 August 2019
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A Savings Incentive Match Plan for Employees Individual Retirement Account (SIMPLE IRA) is a type of retirement plan an employer may choose to establish. When an individual decides to perform a SIMPLE IRA rollover, there are some tips that may help him avoid taxes and penalties. Such tips include making certain the money from the original IRA is deposited into the new account within 60 days of disbursement. Tips may also include the type of account the money may be deposited into to avoid taxation. For example, a SIMPLE IRA that is less than two years old must be rolled over to the same type of account to avoid taxes and penalties.

One of the most important tips for a SIMPLE IRA rollover involves the timeliness of the rollover. With a SIMPLE IRA rollover, the account holder receives funds from his SIMPLE IRA; it is up to him to deposit these funds in a new SIMPLE IRA, an IRA, or other type of retirement account. In order to avoid paying taxes and penalties, a person typically has 60 days to deposit the funds. The account holder may use the money for his own purposes as long as he is sure can make the deposit within the 60-day window. If he deposits the money after the 60 days have passed, the money is usually deemed a distribution and becomes subject to taxes and penalties.


Timing is also important when it comes to choosing the type of IRA into which an account holder will roll his SIMPLE IRA. There is a two-year rule that affects SIMPLE IRA rollovers. In order to avoid taxation and penalties, a person must roll a SIMPLE IRA that is less than two years old over into a different SIMPLE IRA. After the two-year mark, a person usually has the option of rolling his SIMPLE IRA over into a new SIMPLE IRA, an IRA, or another type of retirement account, such as a 401K or a 457 plan.

An individual who wants to accomplish a SIMPLE IRA rollover may consider performing a transfer instead. In such a case, the funds in his SIMPLE IRA account are transferred to a different account. He does not receive the money and does not have to take responsibility for depositing it into a new account in a timely manner. These transfers do not usually result in taxation or penalties. They are usually subject to the two-year rule, however.


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