Why Choose a Self-Directed SIMPLE IRA?

Why Choose a Self-Directed SIMPLE IRA?

When you hear about a “simple” IRA, you have to be careful. After all, some people might use the term as an unofficial way to describe, say, a Traditional IRA. After all, that’s a straightforward, simple account. Then there’s the Self-Directed SIMPLE IRA, or Savings Incentive Match Plan for Employees (SIMPLE) IRA. This is a different style of account altogether, and if you look into it, you might find that it matches what you need to start your retirement plan. Let’s dive in.

What is a SIMPLE IRA?

A SIMPLE IRA is a tax-advantaged retirement plan that you can put in place in a small business. This allows you to create a retirement plan that employees can also use, which creates a benefit of working at your company. Here’s how we describe it at our website:

Employees can choose to make contributions up to the allowable limit. Employers must contribute to the plan by matching the employee’s contributions dollar for dollar up to 3% of the employee’s compensation, or by just contributing 2% of compensation with no matching. All contributions are made directly to the IRA established for each employee.

Key Characteristics

There are a few other key characteristics you’ll want to know about. For example, contributions in a SIMPLE IRA are tax deferred, meaning that you pay taxes on this income when it comes out of the retirement account. Contributions will then be removed from your “gross” income, meaning that they’re not taxed until withdrawn from the account. (Note: to avoid penalties and fees, you’ll have to wait until hitting retirement age to take this money out of the account).

With that in mind, you’ll want to think about how this might work in the context of your own company. If you’re building a retirement plan for people who work at a company, for example, you might find that the SIMPLE IRA is a powerful tool for providing a benefit to the people who work there. However, you’ll want to go even deeper into the SIMPLE IRA to understand how it might fit.

Diving Deeper into the Simple IRA

You can consider a SIMPLE IRA as a possibility for a company with fewer than 100 employees. At larger sizes than that, you may have to look into different possibilities for building retirement accounts and benefits. The SIMPLE IRA’s low start up and administration costs, however, can make it a key advantage for small businesses. Specifically those who want to build a more sizeable retirement benefits package without breaking the bank on their employee payroll budget.

There’s also flexibility with how much you contribute towards employees’ accounts. This can be invaluable as you build a business, because it gives you increased flexibility with your budget. After all, not very small business can afford to handle a high degree of contributions towards retirement. But if you need to get started building a retirement program that works for your company, the SIMPLE IRA is a simple way to get started. Pun fully intended.

Of course, there’s also the possibility of self-directing, which offers even more options for how people can use these accounts for retirement purposes. Through self-direction, investors can access a wider variety of potential retirement investment asset classes. This provides more overall control and flexibility with how investors put money away for retirement. Want to know more about how it all works and figure out how the SIMPLE IRA might fit into your plans? Now’s the time to seek out information about SIMPLE IRAs. Find out more about them by giving us a call at 866-7500-IRA.