Why Choose a Self-Directed SIMPLE IRA?

What are the Features that Define a Self-Directed SIMPLE IRA?

For many investors who are new to the various retirement accounts available to them, the SIMPLE IRA can sound like an oxymoron. Simple? How is that the case when there’s so much information to read through? But as you start to explore the SIMPLE IRA, you’ll see that it actually can be quite simple. Using a Self-Directed SIMPLE IRA can also be a simple way to put money aside for retirement, because it allows you to make your own financial decisions. But how does a SIMPLE IRA work? What are the defining features that separate it from the list of other IRA types available? Here’s what you’ll need to know.

Feature #1: A Simple IRA is Designed for Small Employers and the Self-Employed

You’re not going to use a SIMPLE IRA if you work for someone else and have a retirement account through them, unless that business has set up a SIMPLE IRA that works with your paychecks. Does that sound confusing? Here’s what you’ll need to know. A Self-Directed SIMPLE IRA is a retirement plan that eligible small employers and self-employed individuals can set up for the benefit of their employees. This is a great way for businesspeople who have some employees to set up a retirement plan in their business. This benefit can be an interesting way to entice people to work for that business. However, it’s important to note that you’ll only be eligible to open a Self-Directed SIMPLE IRA if your company has fewer than 100 employees.

Feature #2: Low Start-Up and Administration Costs

Another benefit for investors who are setting up a Self-Directed SIMPLE IRA at their business? It’s a relatively low-cost way to help fund your employee’s retirement. Of course, you will be responsible for employer contributions toward these retirement accounts. But in terms of the administration and handling the SIMPLE IRA itself? The costs are relatively low. This is another advantage, considering small businesses are constantly looking for ways to tighten the budget and remain competitive with larger businesses.

Feature #3: Contributions are Tax-Deferred

What happens when someone makes a contribution from their gross income to a SIMPLE IRA? In this case, those contributions are tax-deferred, or deductible. The “deferred” part comes from when the investor reaches retirement age and takes distributions from the account. They will owe money on these distributions as taxable income. However, while the money is still in the SIMPLE IRA it is growing tax-free, which is the primary benefit to investing through something like a SIMPLE IRA.

Understanding the SIMPLE IRA

Why use a Self-Directed SIMPLE IRA? For many businesspeople, that answer may be different. Many investors set them up because they have a small business and want to get a retirement package set up. Others may have more employees and want to create a retirement benefit that their employees can count on. The motivations might be different, but the point of a SIMPLE IRA remains clear: investing for the future.

Although these accounts can sound complicated, the beauty of the SIMPLE IRA is that once it’s setup, there’s very little to do. The fees are low and it’s possible to Self-Directed a SIMPLE IRA in the way you see fit. This makes them attractive to a wide variety of people, especially business owners who are looking to create an incentive for employees to come work for them.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.

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