SEP IRA

Posts Tagged ‘SIMPLE IRA’

Question: I want to cash out my entire IRA?

I have a SIMPLE IRA floating around from a previous job with about $1,000 in it, and i need to cash it out to pay off a credit card. I need to know if i can do this, how soon, and what are the consequences to it? i know it’s not a 401k but i know the IRA is similar, help?

Answer: with the simple, there’s a 25% penalty if you cash out within 2 years of when you started working for the company. longer than that, it’s a 10% penalty.

this is in addition to paying regular income tax on the value of the account.

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Question: i requested an inservice withdrawal from my SIMPLE IRA and was told that it is not allowed, is this correct?

Answer: Read your plan document. A SIMPLE should be covered by the same withdrawal rules as an IRA: withdrawals constitute taxable income (ordinary income); 10% penalty if withdrawn before 59-1/2 (25% if in the the first 2 yrs of the plan); money must be in SIMPLE for 2 years before you can roll to an IRA.

There are some special withdrawals allowed for SIMPLEs:
- for medical expenses
-to buy a first house
- if you are completely disabled
- to purchase health insurance
- to pay for college expenses

So the withdrawals should be allowed, providing the money has been in the plan for at least 2 yrs.

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