During the first two years after a SIMPLE IRA is established, assets held in the SIMPLE IRA must not be transferred or rolled over to another retirement plan. Since you have met the two-year requirement, your SIMPLE IRA assets may be converted to a Roth IRA. The amount you convert will be treated as ordinary income, subject to income tax.

The early-distribution penalties that apply to distributions made before the IRA owner reaches the age of 59 ½ do not apply to Roth conversions. Therefore, you will not owe early-distribution penalties on the amount you convert to your Roth IRA, regardless of your age at the time the conversion occurs.

To be eligible for a Roth IRA conversion, your modified adjusted gross income (MAGI) must not exceed $100,000. This $100,000 limit applies to individuals who file as single, as well as individuals who file as "married filing jointly". Therefore, if your and your spouse's combined MAGI exceeds $100,000 for the year, neither of you is eligible for a Roth IRA conversion. In addition to meeting the income requirements, your tax filing status must be "single", "head of household" or "married filing jointly". Individuals who file as "married filing separately" are not eligible for a Roth conversion.

For assistance in computing your MAGI, refer to IRS publication 590 or the instructions for filing IRS Form 8606, both available at www.irs.gov. Use the second search bar to locate the documents. (To learn more about SIMPLE IRAs and other retirement plans, see A Tour Through The Different Retirement Plans.)

This question was answered by Denise Appleby
(Contact Denise)

  1. How can I determine if a longevity annuity is right for me?

    A longevity annuity may be right for an individual if, based on his current health and a family history of longevity, he ... Read Full Answer >>
  2. How does a Roth IRA grow over time?

    Your Roth IRA account grows over time thanks to two funding sources: contributions and earnings. While your contributions ... Read Full Answer >>
  3. Can my IRA be taken in a lawsuit?

    Whether your IRA can be taken in a lawsuit depends largely on your state of residence and the judgment in question. There ... Read Full Answer >>
  4. Can my 401(k) be seized or garnished?

    As long as your retirement funds are held in your 401(k) and you do not take them as distributions, your 401(k) cannot be ... Read Full Answer >>
  5. Are mutual funds considered retirement accounts?

    Unlike a 401(k) or Individual Retirement Account (IRA), mutual funds are not classified as retirement accounts. Employers ... Read Full Answer >>
  6. Can my IRA be garnished for child support?

    Though some states protect IRA savings from garnishment of any kind, most states lift this exemption in cases where the account ... Read Full Answer >>
Related Articles
  1. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  2. Professionals

    How to Protect Retirement and Help Adult Kids

    Parents can both protect their retirement money and help their adult kids. Here's how.
  3. Retirement

    10 Ways to Save Your Retirement: It's Not Too Late

    It's not too late to start saving for your retirement, even if you took longer to start thinking about it and doing something about it.
  4. Investing

    10 Ways to Effectively Save for the Future

    Savings is as crucial as ever, as we deal with life changes and our needs for the future. Here are some essential steps to get started, now.
  5. Retirement

    How Robo-Advisors Can Help You and Your Portfolio

    Robo-advisors can add a layer of affordable help and insight to most people's portfolio management efforts, especially as the market continues to mature.
  6. Professionals

    How to Protect Your Portfolio from a Market Crash

    Although market crashes are usually bad news for your portfolio, there are several ways to minimize losses or even profit outright from market movement.
  7. Professionals

    Why Women Are Underprepared for a Spouse’s Death

    Women are typically less prepared for the death of a spouse than men. An advisor can help mitigate some of the financial burdens widows may end up facing.
  8. Professionals

    3 Benefits of Working Longer (and Retiring Later)

    There are many reasons why folks in their 60s may want to keep working until at least age 70. Here are three.
  9. Retirement

    What Does It Cost to Retire in Costa Rica?

    Tally up the costs associated with taking your retirement in Costa Rica, and determine whether you have what it takes to live in paradise.
  10. Retirement

    How to Decide Where to Live in Retirement

    Here's a guide to help you decide where you want to live after retirement.
  1. Qualified Longevity Annuity Contract

    A Qualified Longevity Annuity Contract (QLAC) is a deferred annuity ...
  2. See-Through Trust

    A trust that is treated as the beneficiary of an individual retirement ...
  3. Backdoor Roth IRA

    A method that taxpayers can use to place retirement savings in ...
  4. Current Service Benefit

    The amount of pension benefit accrued by an employee who had ...
  5. Self Invested Personal Pension (SIPP)

    A tax-efficient retirement savings account available in Great ...
  6. Senior Move Manager

    Senior move managers (SMMs) help seniors downsize and relocate ...

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!