Self-Directed SIMPLE IRA

Everything You Need to Know About a Self-Directed SIMPLE IRA

What is a SIMPLE IRA? Some investors confuse the term with a Traditional IRA and believe that a SIMPLE IRA refers to the simplicity of the IRA itself. But SIMPLE in this case actually stands for “Savings Incentive Match Plan for Employees,” which is a specific tax-favored retirement plan for eligible small employers. That includes self-employed individuals. And if you are interested in a Self-Directed SIMPLE IRA, now’s the time to learn all about what this account has to offer.

How a Self-Directed SIMPLE IRA Works

As we note in our guide to the Self-Directed SIMPLE IRA, this can function as a “salary reduction” plan. Here is what our page has to say on the subject: employees can make contributions up to the contribution limit. The employers must then contribute to the same plan by matching the employee’s contributions. That will be done, dollar for dollar, up to 3% of the employee’s salary. “Or just by contribute 2%,” our page notes, “with no matching.” This money is put directly into the IRA that has been established for every individual employee.

When an individual makes contributions to their Self-Directed SIMPLE IRA, these contributions are then tax-deferred, which means that they can be deducted from the individual’s gross income. There is no tax paid on the money used for these contributions until they are taken out of the SIMPLE IRA, whether that’s with penalties before retirement age or as a valid deduction from a SIMPLE IRA after retirement. If you are looking for an account that allows for after-tax contributions that then reduce the tax burden down the line, a Self-Directed Roth IRA is your option there. You can read more about Self-Directed Roth IRAs here.

When is a Self-Directed SIMPLE IRA a Good Idea?

We are not a team that’s going to tell you everything you need to know about which individual investments to make—we’re a Self-Directed IRA administration firm that serves as the custodian to the account. However, what we can tell you is that a SIMPLE IRA itself is a good idea for certain types of investors. Here is what you will need to know about when a SIMPLE IRA might be a good idea.

For starters, these are traditionally best for self-employed individuals or smaller companies. For example, a company with fewer than 100 employees.

A SIMPLE IRA is also good when investors want minimal start-up and administration costs associated with the account, if you opt for a Self-Directed SIMPLE IRA.

A SIMPLE IRA may also help you create an employee retirement plan when there are no such plans in place. This lets you create a retirement plan that serves as a benefit for working for the company in question. And having that in place leads to all sorts of other good things, not the least of which is having employees who feel incentivized to contribute to their own retirement plans.

The Art of Self-Directing

Why a Self-Directed SIMPLE IRA? Self-direction puts more options in your pocket. As the investor, you will be free to choose from all sorts of nontraditional retirement assets, including real estate, tax liens, precious metals, and more. Having this kind of investment freedom means that individual investors can be free to determine the kind of retirement portfolio they want to build.

For more information about the Self-Directed SIMPLE IRA, visit our Self-Directed SIMPLE IRA page here at American IRA. This will help you get the basics well in hand. And for more information about opening a SIMPLE IRA with American IRA, you can always continue to browse our website, or call us by dialing our number: 866-7500-IRA.