Tips for rolling over a SIMPLE IRA include depositing the money into the new account within 60 days and choosing the same type of account for a less than two-year-old IRA. Timing is important, and transfers may be an option to avoid taxes and penalties.
An Employee Individual Retirement Account Incentive Savings Plan (SIMPLE IRA) is one type of retirement plan that an employer may choose to establish. When an individual decides to roll over a SIMPLE IRA, there are a few tips that can help him avoid taxes and penalties. Such tips include making sure the money from the original IRA is deposited into the new account within 60 days of the disbursement. Tips can also include the type of account where money can be deposited to avoid taxation. For example, a SIMPLE IRA that is less than two years old must be transferred to the same type of account to avoid taxes and penalties.
One of the most important tips for a SIMPLE IRA rollover concerns 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 into a new SIMPLE IRA, IRA, or other type of retirement account. To avoid paying taxes and penalties, a person typically has 60 days to deposit the funds. The account holder can use the money for his own purposes as long as he is confident that he can make the deposit within the 60 day window. If he deposits the money after the 60 days have passed, the money is generally considered a distribution and becomes subject to taxes and penalties.
Timing is also important when it comes to choosing the type of IRA in which an account holder will launch their SIMPLE IRA. There is a two-year rule that affects SIMPLE IRA rollovers. In order to avoid taxes and penalties, a person must convert a SIMPLE IRA that is less than two years old into another SIMPLE IRA. After the two-year mark, a person usually has the option of transferring their SIMPLE IRA to a new SIMPLE IRA, IRA, or other type of retirement account, such as a 401K or 457 plan.
An individual wishing to make a SIMPLE Rollover IRA may consider making a transfer instead. In that case, the funds in your 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 usually do not involve taxation or penalties. However, they are usually subject to the two-year rule.
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