If you've left a company with a SIMPLE IRA plan and go to work somewhere else with a 401(k), you can sometimes roll the money into your new employer's 401(k). The biggest question is how long it's been since you've first received money in your SIMPLE account.
Rolling It Over
A SIMPLE IRA is a type of employee retirement plan designed specifically for small businesses. Employers can either put a portion of your compensation into the plan every year or match your contributions, both up to a certain limit.
As with other types of IRAs, you don't pay taxes until you withdraw money from the account, and you face an extra tax penalty if you take money out of the plan before you're 59 1/2 years old.
If you leave one company with a SIMPLE IRA and move to another, you can freely roll funds over from the old account to the new one without having to pay a tax or any penalty.
If your new employer has a 401(k) or 403(b) retirement system instead, the rules are a bit more complicated. Generally, you'll face a tax penalty if it hasn't been two years since your first contribution to the SIMPLE IRA. This means that it likely makes financial sense to wait to roll the funds over if this period hasn't elapsed yet.
If you're not sure whether or when the two year period is up, you can check your account statements, contact your old employer or the company that runs the SIMPLE IRA plan or contact a lawyer or a tax professional for advice.
Early Withdrawal Exceptions
As with other types of retirement accounts, there are certain times you can withdraw money from a SIMPLE IRA without facing a tax penalty. You can generally do so if you're disabled or for certain medical or higher education expenses. In some cases, you can use the SIMPLE IRA funds to buy medical insurance while unemployed.
You can also generally withdraw up to $10,000 to build, buy or remodel a first home. If the IRS issues a levy against your SIMPLE IRA to pay other owed taxes, you won't face an additional tax penalty when the agency takes money out of your account.
If you're not sure if a certain withdrawal is eligible, it's a good idea to check with an accountant or another tax advisor, since those penalties can add up.
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