How do I roll over a SIMPLE IRA to a Roth IRA?


Scott Bishop, CPA, PFS, CFP®
STA Wealth Management, LLC, Houston, TX

The rollover would be considered a Roth conversion, which is permissible after the two-year SIMPLE IRA waiting period for distributions, measured from the date of the first SIMPLE contribution to the plan. Then, if you violate the two-year rule, taxes and a 25% penalty will be triggered. The conversion can be made by transferring the assets from the SIMPLE IRA to a Roth IRA (either at the same custodian or by transferring directly to a new custodian).

As with all Roth conversions, you will owe income tax on the amount converted, and you should plan to pay the tax with money that isn’t in the IRA. Also, now that you can no longer re-characterize (undo) a Roth Conversion, you should understand the tax impact before converting any pre-tax retirement account to a Roth (IRA or 401k).

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