What is the penalty tax for early withdrawals from a SIMPLE before age 59 and a half?

The penalty tax for early withdrawals from a SIMPLE IRA before the age of 59 and a half is indeed 10%. This aligns with the general rules governing IRAs, which stipulate that individuals under this age who access their retirement funds typically incur a penalty to discourage premature distributions.

However, it’s important to note that there are specific considerations for SIMPLE IRAs. If the withdrawal occurs within the first two years of participation in the SIMPLE IRA plan, the penalty doubles to 25%. This suggests that while a 10% penalty applies generally after the two-year window, the additional risk of a higher penalty emphasizes the importance of adhering to the rules and timing when considering early distributions.

In summary, the standard early withdrawal penalty for a SIMPLE IRA after the initial two years of participation is 10%, underscoring the plan's design to encourage long-term retirement savings while also imposing a stricter penalty within the first two years.