If you leave your job and leave behind a Savings Incentive Match Plan for Employees (SIMPLE) individual retirement account (IRA), you have the option to roll over the SIMPLE IRA balance to a traditional IRA or another SIMPLE IRA plan—or, depending on your new employer’s plan, you may be eligible to roll the funds into a 澳洲幸运5官方开奖结果体彩网:401(k) plan with your new employer.

If, however, your ultimate goal is to roll over your SIMPLE IRA to a Roth IRA, you need to process a 澳洲幸运5官方开奖结果体彩网:Roth IRA conversion. Follow these steps to com𝔍plete the transaction.

Review Possible Penalties

First, make sure you can convert your SIMPLE IRA to a Roth IRA without incurring a penalty. The 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS) requires that you participate in a SIMPLE IRA for 澳洲幸运5官方开奖结果体彩网:at least two years before removing any money from the account. If you are under age 59½ and don’t wait, it will count as a distribution and you’ll incur a 25% penalty. What’s more, the entire amount withdrawn will count toward your 澳洲幸运5官方开奖结果体彩网:gross income for the year, which could bump you into a higher 澳洲幸运5官方开奖结果体彩网:tax bracket.

Check With Plan Administrator

Check with your 澳洲幸运5官方开奖结果体彩网:plan administrator if you have any questions about whether you have passed the two-year limitation period. If you have passed it, you will owe taxes only on the converted balance. If you haven’t, you can leave the money in the account at the current financial institution or have the assets transferred—or 澳洲幸运5官方开奖结果体彩网:rolled over—to a SIMPLE IRA at another financial institution until the two-year waiting period is over, at which point you can do the Roth conversion.

Under the SIMPLE requirements, an employer must allow an employee to hold their assets at another financial institution.

Choose a Custodian

Next, you need to decide whether the 澳洲幸运5官方开奖结果体彩网:custodian holding your SIMPLE IRA is the one you would like to use for your Roth IRA. If not, you need to determine if you either can do a conversion through the transfer process or need to transfer the account in-kind to the new custodian and then convert to a Roth IRA there. Your chosen custodian should be able to help you make that determi♒nation. If you need to first transfer the SIMPLE IRA in-kind, you must open an account to accept that transfer in addition to your Roth IRA.

The Bottom Line

Converting a SIMPLE IRA to a Roth IRA is possible without being subject to a penalty as long as you follow the rules. Keep in mind that you’ll still owe taxes 澳洲幸运5官方开奖结果体彩网:on the amount converted. The benefits of converting a SIMPLE IRA to a Roth IRA include tax-free withdrawalsꦅ in retirement and no required minimum distributions (RMDs).