Savings Incentive Match Plan for Employees (SIMPLE IRA) is an easy way to offer retirement savings plans to employees.
As a result of complexity and cost, many small businesses do not provide their employees with retirement plans. SIMPLE IRA plans are similar to 401Ks without the hassle.
What is a SIMPLE IRA?
Unlike a 401K, to qualify for a SIMPLE IRA you must be a small business with fewer than 100 workers or a self-employed individual.
Small business owners enrolled in a SIMPLE IRA are required to make a minimum match of 3% or a contribution of 2% of compensation towards their employees’ retirement account. You and your employees can set aside a percentage of pay for retirement with a SIMPLE IRA.
As long as you withdraw the money when you retire, it will grow tax-deferred.
How do I start a SIMPLE IRA?
When it comes to retirement plans, simplified IRA plans are known for being easy to manage and less time-consuming.
3 Simple Steps to Start a SIMPLE IRA
1. Form 5304-SIMPLE, is where employers allow the employees to select their own financial institution to contribute money to their SIMPLE IRA. Form 5305-SIMPLE, is where employers choose a designated financial institution that the employees must use for their contribution.
2. Employees should be informed about the agreement.
3. Create an IRA account for each employee.
Pros and Cons of a SIMPLE IRA
Choosing the right retirement plan for your business can be difficult. There are always pros and cons to every retirement plan.
Is a SIMPLE IRA a good choice for your business?
Providing your employees and yourself with a SIMPLE IRA is always a good idea. You can ensure your employees' futures by implementing such a plan.
For small business owners, this option for a retirement plan is more convenient and cost-effective. As a bonus, employees can enjoy tax advantages and matching benefits.
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