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What are the penalties for withdrawing from my SIMPLE IRA early?

If you withdraw funds from your SIMPLE IRA before age 59½, you may face early withdrawal penalties unless the reason qualifies for an exception.

The penalty depends on how long you've been in the plan:

• 25% penalty if the withdrawal happens within the first 2 years of participating in the SIMPLE IRA and no exception applies.
• 10% penalty if the withdrawal is made after 2 years, but you’re still under age 59½ and don’t qualify for an exception

Exceptions to the Early Withdrawal Penalty
You may avoid the penalty (but still owe taxes) if your withdrawal meets one of these IRS-approved exceptions:

• You become permanently disabled
• You are age 59½ or older
• You use up to $10,000 for a first-time home purchase
• Withdrawals are due to a qualified higher education expense
• You have unreimbursed medical expenses exceeding 7.5% of your adjusted gross income
• The withdrawal is due to an IRS levy
• You are paying health insurance premiums after losing your job
• You pass away (your beneficiaries receive the funds)

Note: Even if you qualify for an exception, your withdrawal is still subject to income tax.