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.

Example of SIMPLE IRA forms 5304-SIMPLE and 5305-SIMPLE

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. 

The pros and cons of a SIMPLE IRA plan chart

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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