SIMPLE IRA

 

What is a SIMPLE IRA?

Savings Incentive Match Plan for Employees (SIMPLE) is established by an employer and allows both employee salary deferral contributions and an employer match. Employers who provide SIMPLE plans may not have more than 100 employees. SIMPLE plans have minimal start-up and operating costs.

 

TL;DR –A SIMPLE IRA is an employer-sponsored plan for small businesses that allows employee contributions and employer match.

 

Eligibility

  • Self-employed or small businesses with 100 or fewer employees

  • Employer cannot have any other retirement plan

Contribution Limits

Employees:

  • $13,500 per year if under age 50

  • $16,500 if age 50 or over

Employers:

  • 1% -3% matching compensation OR

  • 2% nonelective contribution*

Withdrawals

  • 59½ and under: Taxes and 10% penalty

  • Additional 25% penalty applies if the withdrawal is made in the first 2 years of participation

Taxes

  • Contributions are made with pre-tax dollars, meaning the amount can be deducted from your taxable income

  • Money grows tax-deferred; however, withdrawals will be taxed as ordinary income..

 
Edward Oh