The simple IRA is a retirement plan that can provide you with several benefits. While it is similar to other retirement plans that are available, it has some unique features that make it desirable. Here are the basics of the simple IRA and how it could benefit you.


In order to start a simple IRA, you will need to first determine if you are eligible to do so. You have to have a company that has less than 100 employees, and the employees have to make more than $5000 per year. The other requirement is that you cannot have another qualified retirement plan, such as a 401(k). As long as you meet those requirements, you should be able to set up a simple IRA.

Getting Started

One of the major benefits of getting a simple IRA is the easy setup. This is one of the simpler retirement plans to initiate. You should be able to make a phone call to a financial broker and get the process started. There will be minimal paperwork for you to complete in order to set up the program. Your financial institution or bank should be able to provide you with a model that will help you set up your simple IRA. You will then need to notify your employees that you are starting a simple IRA and give them the details about the accounts.


With the simple IRA, employees are allowed to make tax-deductible contributions to their accounts. This allows them to contribute directly through payroll deductions. It also helps them put away more money for their retirement. Employees are allowed to contribute as much as $11,500 per year to their accounts. Once they reach the age of 50, they can start contributing as much as $14,000 per year.

Employee Matching

Another good feature about this type of account is that the employer can contribute to the employees' retirement accounts. For the employer, this provides a nice tax deduction at the end of the year. Every dollar that you contribute will allow you to lower your taxable income.

For employees, this represents free money to use for retirement. When contributing, the employer has two different options with this type of plan. They can choose to match the employees' contributions up to 3 percent of the employees' income. The other option is to contribute a non-elective 2 percent to every employee's account, regardless of whether the employee contributes.

Tax-Deferred Gains

Once the money is in the simple IRA, the employee can choose to invest it in different securities. For example, he or she could choose to purchase stocks, bonds or mutual fund shares. The money made in return is allowed to grow in the account on a tax-deferred basis. The employee will not have to pay taxes on the money in the account until reaching the age of 59 1/2 and starting to take withdrawals.

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