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Tips for a successful SIMPLE IRA rollover include depositing the money into a new account within 60 days, choosing the right type of account, and following the two-year rule. A transfer may also be an option to avoid taxes and penalties.
An Employee Savings Incentive Matching Plan Individual Retirement Account (SIMPLE IRA) is a type of retirement plan that an employer may choose to establish. When an individual decides to do a SIMPLE IRA rollover, there are some tips that can help them avoid taxes and penalties. Such tips include making sure money from the original IRA is deposited into the new account within 60 days of disbursement. Tips can also include the type of account the money can be deposited into to avoid tax. 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 their SIMPLE IRA; it is up to him to deposit these funds into a new SIMPLE IRA account, an IRA, or another type of retirement account. To avoid paying taxes and penalties, a person generally has 60 days to deposit the funds. The account holder can use the money for his own purposes, as long as he is sure that he can make the deposit within 60 days. If he deposits the money after the 60 days have elapsed, the money is generally considered a distribution and is subject to taxes and penalties.
Timing is also important when it comes to choosing the type of IRA an account holder will roll their SIMPLE IRA into. There is a two-year rule that affects SIMPLE IRA rollovers. To avoid taxes and penalties, a person must roll over a SIMPLE IRA that is less than two years old to a different SIMPLE IRA. After the two-year mark, a person typically has the option to roll over their SIMPLE IRA to a new SIMPLE IRA, an IRA, or another type of retirement account, such as a 401K or 457 plan.
A person who wants to make a SIMPLE IRA rollover may consider making a rollover instead. In such a case, the funds in your SIMPLE IRA account are transferred to a different account. You don’t receive the money and you don’t have to take responsibility for depositing it into a new account in a timely manner. These transfers generally do not result in taxes or penalties. However, they are generally subject to the two-year rule.
Smart Asset.
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