If you have a Simple IRA that was provided by a former employer and you want to rollover the plan to a traditional IRA, there are few restrictions on Simple IRA rollover account that you should be aware of. Simple IRA stands for “Savings Incentive Match Plan for Employees,” and is a type of retirement account that’s only available to self-employed individuals or employers with less than one hundred employees. Under this plan, the employer matches employee contributions up to 3% or they can donate a flat compensation amount (with a minimum of $5,000 a year). Meanwhile, the employee’s contributions to the Simple IRAs are capped at $11,500/year. All of this makes Simple IRAs slightly – yet significantly – different from traditional IRAs.
Another difference from traditional IRA plans can be found in the Simple IRA rollover rules. For starters, you have to wait at least two years from the period of time when you first began contributing to the Simple IRA plan before you’re allowed to do a rollover. So, if you leave the job that provided your Simple IRA after just a year, you’ll need to wait an additional year before you can rollover your plan into another IRA or face paying a hefty fee to the government. The rollover rules will also depend on how the Simple retirement plan has been set up, as it can be established in either IRA or 401k form. Most Simple IRAs aren’t done as 401k plans, but be sure to check before you initiate the rollover.
The good news is that there are no Simple IRA rollover limits on the amount of money that you can transfer to your new account. Completing a rollover isn’t considered to be a part of your yearly contributions, so it won’t affect the overall amount that you can deposit into the account. However, the type of target account you choose for your Simple IRA rollover will likely have its own restrictions on the amount that can be contributed in a calendar year.
If you’re looking for a plan that will allow you to contribute the maximum amount of money each year and you’re self-employed or own a small business, then you might want to consider using a SEP (Simplified Employee Pension) IRA. The SEP IRA and Simple IRA accounts are very similar, although the SEP account would allow you to contribute up to $49,000 a year – a hefty sum compared to the maximum contribution of $5,000 each year to a traditional or Roth IRA. However, if you do not qualify based on your employment status, you’ll need to consider the options provided for in traditional IRAs and 401k plans.
There are other Simple IRA rollover restrictions that you’ll need to consider, including how the money is distributed and the amount of penalties that you can incur if the money is removed from the account early or improperly. These are all factors that you’ll need to discuss with your financial institution to make sure that the transfer goes smoothly and that you get the most out of your retirement savings. If you have any questions about the process beforehand, bring them up and address them before the transfer is initiated so that you aren’t faced with problems later on.