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early distribution

The Two-Year Holding Period for SIMPLE IRAs

SIMPLE IRAs are not so simple. One factor that makes SIMPLE IRAs tricky is that they are subject to unique rules, found nowhere else in the tax code, such as the two-year holding period. Two-Year Holding Period When does the two-year holding period begin? This is a question that often creates confusion. The two-year holding period begins with the date the employee’s first contribution is deposited to the SIMPLE IRA. It is not the date employment begins or even the date you become eligible to participate in the SIMPLE IRA plan. 25% Early Distribution Penalty Distributions taken from a SIMPLE IRA before age 59 ½ are subject to an early withdrawal penalty of 25% when withdrawn during the two-year holding period.

Mailbag Q&A: Early Distributions, Back-door Roth Conversions and More

This week's Slott Report Mailbag looks into early distributions, back-door Roth conversions, and Roth IRAs.

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