A Safer Retirement and Environment – What We’re Implementing to Help Keep You Safe: READ MORE

Here at Chadmere Capital Inurance and Financial Services, we are adhering to state and local guidelines in order to protect both the health and safety of clients and staff. Keeping our clients and staff safe is our highest priority and we’re taking all appropriate measures to ensure a safe environment. Should you prefer to not meet face-to-face, we are continuing to serve our clients through virtual settings such as Zoom or phone calls.

We look forward to continuing to help individuals and families achieve their ideal retirements.

Chademere Capital Insurance and Financial Services
(803) 242-1050

CLOSE

THE TWO-YEAR HOLDING PERIOD FOR SIMPLE IRAS

By Sarah Brenner, JD
IRA Analyst

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Distributions taken from a SIMPLE IRA before age 59 ½ are subject to an early withdrawal penalty of 25% when withdrawn during the two-year holding period. Note this difference vs. the standard 10% early distribution penalty on IRA accounts.

The exceptions to the 10% early distribution penalty that apply to IRAs also apply to the 25% penalty on SIMPLE distributions. For example, if you are under 59 ½ but using the funds from your SIMPLE IRA distribution during the two-year holding period to pay for your child’s college tuition, the 25% penalty would not apply to the distribution. That is because there is an exception to early withdrawal penalty for distributions from an IRA used for qualified higher education expenses.

Rollovers and Transfers

During the two-year holding period, SIMPLE IRA funds may only be rolled over or transferred to other SIMPLE IRAs. SIMPLE IRA funds may not be rolled over or transferred to a traditional IRA or rolled over to an employer plan until the two-year holding period ends.

It used to be that a SIMPLE IRA could only accept rollovers and transfers from another SIMPLE IRA. The Protecting Americans from Tax Hikes (PATH) Act of 2015 changed this rule. During the 2-year holding period a SIMPLE IRA still can only accept a transfer or a rollover from another SIMPLE IRA. However, after the 2-year holding period ends, funds from traditional IRAs and employer plans can be rolled into a SIMPLE IRA.

https://www.irahelp.com/slottreport/two-year-holding-period-simple-iras

Ready To Take

THE NEXT STEP?

 

For more information about any of our products and services, schedule a meeting today.

Or give us a call at (803) 242-1050

Investment advisory services offered through Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser. Nothing on this website constitutes investment, legal or tax advice, nor that any performance data or any recommendation that any particular security, portfolio of securities, transaction, investment or planning strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations, execution of required documentation, and receipt of required disclosures. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD #175083.

 ADV Part 2A & Form CRS              Privacy Policy