Individual Retirement Accounts » SIMPLE IRAs

Distributions

Penalty-free distributions are allowed if there is an exception reason under 72(t) (these distributions are still taxable). The exception reasons for SIMPLE IRAs are the same as those for Traditional IRAs. Any distributions that do not meet an exception reason will be subject to taxation and an early withdrawal penalty of 10%.

A special rule applies to SIMPLE IRA distributions. If a distribution is taken within the first two years of the first contribution made to the plan and there is no exception reason, the account owner faces a 25% penalty (instead of 10%).