Is It Time to Move Your SIMPLE IRA?

SIMPLE IRA Rollovers Can Be Complicated

September 2012

A SIMPLE IRA can be a beneficial retirement savings option for small businesses and their employees, but it's really not that "simple." And while Ally Bank doesn't offer a SIMPLE IRA product, people often ask us about them, and an important part of our mission is to help people make informed financial decisions.

What is a SIMPLE IRA?

SIMPLE stands for "Savings Incentive Match Plan for Employees." These plans were established to provide a way for employers in small companies to set up an individual retirement account (IRA)-based retirement plan for their workers.

In practice, these plans operate a little like a 401(k): Employees can choose to have part of their paycheck go directly into their SIMPLE IRA, reducing their tax burden. Employers make matching contributions. The Internal Revenue Service says these plans "give small employers a simplified method to make contributions toward their employees' retirement and their own retirement."

Are there SIMPLE IRA Alternatives?

If you've decided the SIMPLE IRA offered by your employer isn't meeting your expectations, and you'd like to roll over your savings to a different IRA, you may find the process somewhat complicated.

The reason is, in fact, simple: Unless you're rolling a SIMPLE IRA directly into another SIMPLE IRA, federal rules impose a two-year period, starting with the date of your first contribution, in which a disbursement from a SIMPLE IRA is subject to taxation, even if you plan a direct rollover into another retirement account.

After the two-year period has passed, SIMPLE IRAs usually can be rolled over into another qualified retirement account, such as a traditional IRA or a Roth IRA, without penalty. But if you have any doubts about the process, consider consulting a retirement planning or tax professional about rolling over a SIMPLE IRA.

Ally Bank is Here to Help.

Once you've made sure a rollover can proceed without penalty, you might check out our traditional and Roth IRAs. Ally Bank doesn't offer a SIMPLE IRA, but Ally Bank IRA CDs and IRA Online Savings Accounts offer competitive interest rates along with the security of Federal Deposit Insurance Corporation (FDIC) insurance up to the maximum allowed by law.

We also make it easy to open and manage your accounts online at your convenience. You can find out more information at Allybank.com, or by calling 877-247-ALLY (2559), where live assistance is available 24/7.

Whether it's by phone, email or Web chat, customer care representatives will be happy to answer your questions and further explain the benefits of Ally Bank IRAs.

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