SIMPLE IRA Withdrawal Calculator
SIMPLE IRAs follow traditional IRA rules with one expensive exception: withdraw within two years of your first contribution and the early-withdrawal penalty is 25%, not 10%. Everything else works as you would expect.
The two-year rule
The clock starts on the date of the first contribution your employer made to your SIMPLE IRA — not the date you joined, and not 1 January. Within that two-year window:
- An early withdrawal before 59½ carries a 25% penalty rather than 10%, on top of income tax.
- You may only roll the money to another SIMPLE IRA. Rolling to a traditional IRA or a 401(k) inside the window is treated as a full taxable distribution plus the 25% penalty — a very expensive filing error.
After two years, the account behaves like any traditional IRA: 10% early penalty, unrestricted rollovers, ordinary income tax on withdrawals.
Everything else
- Withdrawals are ordinary income — contributions were pre-tax.
- Required minimum distributions from 73 (75 for those born in 1960 or later), even if you are still working for the employer that sponsors the plan.
- The rule of 55 does not apply. A SIMPLE IRA is an IRA, so early access before 59½ runs through a 72(t) series or one of the standard exceptions.
- No loans. IRAs cannot be borrowed against.
How the calculator works
Each month the balance earns one month of return, then the withdrawal is taken out. Every 12 months the withdrawal is increased by the inflation rate so your spending power stays level. If you enter a tax rate, each withdrawal is grossed up so the after-tax amount you keep matches the number you typed. The calculator stops when the balance hits zero, or after 100 years if it never does.
The "to last 20 / 25 / 30 years" figures are solved by bisection: the largest starting withdrawal that still survives that horizon under the same return and inflation assumptions.
What to do with an old SIMPLE IRA
Once the two years have passed, consolidating an old SIMPLE IRA into your main traditional IRA is almost always the right move: one account, one required distribution calculation, one set of investment choices, and no chance of missing a distribution and paying the 25% penalty for a missed RMD. Do it as a direct trustee-to-trustee transfer rather than taking a cheque, which avoids the 60-day rule and the once-per-year indirect rollover limit entirely.
Choosing realistic inputs
- Annual return. 4–5% is a conservative planning number for a balanced portfolio; 6–7% is closer to long-run history for 60/40; cash and CDs are 3–5% today but fall when rates fall.
- Inflation. The Federal Reserve targets 2%; the 30-year U.S. average is about 2.5%. Healthcare inflation runs higher, so retirees with large medical costs should test 3–3.5%.
- Withdrawal. Use what you actually spend, minus guaranteed income (Social Security, pension, annuity). That net gap is what savings must cover.
Frequently asked questions
What is the SIMPLE IRA 2-year rule?
For two years from the date of the first contribution to your SIMPLE IRA, early withdrawals before 59½ carry a 25% penalty instead of 10%, and the money can only be rolled into another SIMPLE IRA. After two years the normal traditional IRA rules apply.
Can I roll a SIMPLE IRA into a traditional IRA?
Yes, once the two-year period has passed. Doing it earlier is treated as a complete taxable distribution plus the 25% penalty, so check the date of your first contribution before initiating any transfer.
How are SIMPLE IRA withdrawals taxed in retirement?
As ordinary income at your marginal rate. Contributions were made pre-tax through salary deferral, so tax is due on the way out — enter your expected retirement rate in the calculator above.
Do SIMPLE IRAs have required minimum distributions?
Yes, from age 73 (75 for those born in 1960 or later), on the same schedule as any traditional IRA. Unlike a workplace 401(k), there is no "still working" exception for a SIMPLE IRA.
Related calculators
SavingsLast calculators are educational estimates. They assume a constant average return and steady inflation; real markets are volatile and sequence-of-returns risk can shorten how long money lasts. Nothing here is financial, investment, tax, or legal advice. Consult a qualified professional before making decisions.