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Cashing out a SIMPLE IRA?

Asked by: jbell 871 views YA Discussion

I recently started working for my state where I have a separate retirement plan. I have approx. $ 2,500 amount left in my SIMPLE IRA account from my previous job. I know I could roll over to an IRA and then roll over to my state retirement fund IF THEY ALLOW IT, however; I’m thinking of cashing this out to pay off my credit card. It will be past the two year mark, so I know I will have a 10% penalty. My questions are as follows:

When do I pay the 10% penalty: when I cash it in or wait until tax time.
Do they just tack on the $ 2,500 to my AGI for tax purposes, or is it addressed separately?

Bottom line: Will an amount of $ 2,500 be worth cashing out?

FYI: I am in the 15% federal bracket and my state tax is: 6.00% plus $ 110.00

1 Answers

  1. krn001 on Feb 04, 2013 Reply

    Normally the company determines the tax & penalty withholding amount at time of closing out the account. With taxes & penalties you would net about $ 1875.00 or 75% of its value.

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