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?

  • 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withdrawal of any (non-basis) amount from a Traditional IRA or earnings from a Roth IRA is 10% of the amount withdrawn in addition to income tax on the amount.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: money.stackexchange.com/questions/7848/… – Mechaflash Nov 16 '12 at 16:20

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?

| improve this answer | |

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.