General | Knowledge Base

What is a SIMPLE IRA plan?

An Individual Retirement Account (IRA) is a long-term savings account that individuals with earned income can use to save for the future while enjoying certain tax activities. There are different types of IRA plans existing at present. In all those, the SIMPLE IRA provides a salary reduction contribution option along with the employer’s matching or non-elective contribution to their retirement fund.

Last updated on Sep 17, 2024

Can I roll over a SIMPLE IRA to another retirement account?

Yes. After completing a two-year contribution period, individuals have the option to make tax-free rollovers from their SIMPLE IRAs to various non-Roth IRAs or other self-employed retirement plans.

Last updated on Sep 18, 2024

Why should I use WealthRabbit for my retirement plan?

WealthRabbit is an exclusive application designed to manage retirement plans. WealthRabbit offers many advanced features for your Individual Retirement Account (IRA), including: - Employee Portal - Risk Calculator - Fund Management - Automatic Rebalancing - Investment Portfolio Management - Two-Factor Authentication - Alerts & Notifications WealthRabbit makes saving for your financial future easy with reduced paperwork, quick and easy setup, and end-to-end administration for your SIMPLE IRA.

Last updated on Sep 17, 2024

When should I start to contribute to my retirement plan?

WealthRabbit allows users at least 18 years old to participate in their employer’s plan. An employee who meets this requirement can start contributing to their SIMPLE IRA once their employer invites them to join the retirement plan and the employee has set up their account. Note: Typically, the employer decides the pay frequency for employee contributions.

Last updated on Sep 17, 2024

I already participated in a SIMPLE IRA at my previous job. Can I utilize the same account to receive contributions from my current job?

If you participated in a SIMPLE IRA with a previous employer and changed your employment within two years, you cannot transfer or roll over the funds from your old plan to your new one. If you withdraw funds from the SIMPLE IRA within those two years, a 25% penalty will be applied. Note: If you are 59½ years old or more at the time of withdrawal, no penalty will be applied. However, after two years, you can request that your current employer transfer the funds from your previous employment to your new SIMPLE IRA plan. For that, you'll need to submit the adoption agreement, along with a copy of Form 5304-SIMPLE or Form 5305-SIMPLE, which your employer used to establish the SIMPLE IRA. Alternatively, you can roll over your previous SIMPLE IRA assets to another financial institution at the end of the two year period.

Last updated on Sep 17, 2024

What happens if I leave the company during the year?

If you are terminated or leave the company during the year, you will be removed from your employer’s SIMPLE IRA program. Effective the final day of your employment, all contributions to your SIMPLE IRA will stop, including both the salary deferral contributions made by you, and any matching or non-elective contributions made by your employer. However, you retain ownership of the funds in your SIMPLE IRA account. The money in the account is yours, and you have control over how it is managed and invested. You can also roll over funds to a new retirement plan if you have completed two years of participation in the existing SIMPLE IRA Program.

Last updated on Sep 17, 2024

I have a retirement fund in an employer-sponsored retirement plan. Will it be possible to transfer the fund from that plan to my SIMPLE IRA account?

Yes, you can transfer the fund from the employer-sponsored retirement plan to your SIMPLE IRA account. However, you will need to complete a minimum of two years of a contribution period to transfer the funds from one retirement plan to another.

Last updated on Sep 17, 2024

Are contributions to a SIMPLE IRA tax-deferred?

Yes. The contributions to a SIMPLE IRA are tax-deferred to provide seamless financial security after retirement. The contributed money will grow tax-deferred until its withdrawal. Note: There won’t be any taxes that need to be paid on investment growth. However, you will need to pay taxes when you withdraw the money.

Last updated on Sep 18, 2024

When can I withdraw my SIMPLE IRA Money?

Generally, individuals are allowed to withdraw their SIMPLE IRA money at 59 ½ years old. However, if you do not meet the eligible age or do not qualify for any exceptions, such as medical expenses while unemployed or certain higher education expenses, you will need to pay an additional tax of 10% or 20% of the amount you withdraw.

Last updated on Sep 18, 2024

Can an employee contribute to both a traditional IRA and a SIMPLE IRA in the same year?

Yes, an employee can participate in and contribute to a traditional IRA even if they are contributing to the SIMPLE IRA plan (employee-sponsored retirement plan) in the same year.

Last updated on Sep 18, 2024

What is the penalty for pre-closing the SIMPLE IRA plan?

If an individual is pre-closing their SIMPLE IRA plan prior to the age of 59 ½ without any other allowable exceptions, they will need to pay 10% of the tax amount as a penalty. It will be added to the tax amount charged when they withdraw the total amount.

Last updated on Sep 18, 2024

Can an employee take loans from a SIMPLE IRA?

No. Neither an employee or employer can take loans from a SIMPLE IRA. Instead, they can withdraw the amount/earnings by pre-closing the account at any time.

Last updated on Sep 18, 2024

What is the employee annual contribution limit for a SIMPLE IRA?

For 2025, the annual contribution limit for SIMPLE IRA has increased from $16,000 to $16,500, and the catch-up contributions remain unchanged with the limit of $3,500. Additionally, higher catch-up contributions for employees who belong to 60 to 63 can contribute with the limit of $5,250.

Last updated on Dec 10, 2024

What are the employee contribution limits for a SIMPLE IRA in 2025?

Employees can contribute a portion of their salary to a SIMPLE IRA through payroll deductions. The contribution limits are as follows: - Employees under age 50 can contribute up to $16,500. - Employees age 50 or older can contribute up to $20,000, which includes a $3,500 catch-up contribution. - Employees aged 60 to 63 are eligible for an increased $5,250 super catch-up, replacing the standard catch-up. This brings the total possible contribution to $21,750 for those in this age range. These limits apply regardless of the employer’s contribution method (match or non-elective) and are subject to annual IRS adjustments. Note: Some employers may offer higher employee contribution limits under the SECURE 2.0 Act, depending on their business size and whether they choose to increase their required employer contributions.

Last updated on May 03, 2025