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I want to know what are the penalties that an individual will face if they withdraw on a SIMPLE IRA outside of a hardship distribution?

(Additionally) I noticed in another post someone mentioned a '2-year rule' as well. If there is such a thing, how does it factor into this equation?

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The standard penalty for early non-hardship withdrawal of any (non-basis) amount from a Traditional IRA or earnings from a Roth IRA is 10% of the amount withdrawn in addition to income tax on the amount. Do you have any reason to believe that withdrawals from a SIMPLE IRA have different penalties? Also could you include a link to the posting that mentions a '2-year rule' so that everyone reading this is on the same page? – Dilip Sarwate Nov 16 '12 at 15:25
I suppose I should add if there are any differences as I'm unaware that all IRAs follow the same guidelines when it comes to penalties. Here's the link to the mention of a '2-year rule' on SIMPLE IRAs:… – Mechaflash Nov 16 '12 at 16:20
up vote 3 down vote accepted

The 2 year rule means that the penalty will be 25% in addition to your ordinary income tax rates, not the standard 10%.

Other than that its exactly the same as a traditional IRA.

Info at the IRS Q&A What are the tax consequences when amounts are distributed from a SIMPLE IRA?

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+1 Thanks again littleadv – Mechaflash Nov 19 '12 at 14:45

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