Self-Directed SIMPLE IRA – The Basics
A Savings Incentive Match Plan for Employees (SIMPLE) is a tax-favored retirement plan that eligible small employers (including self-employed individuals) can set up for the benefit of their employees.
A Self-Directed SIMPLE IRA plan can be used as a Salary Reduction IRA.
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.
Contributions are Tax Deferred in a Self-Directed SIMPLE IRA plan.
Contributions are excluded from your gross income and are not taxed until they are withdrawn.
You can Self-Direct a SIMPLE IRA plan.
Use your Self-Directed SIMPLE IRA plan to invest in a variety of assets such as real estate, private lending, limited liability companies, precious metals, and much more!
Why Consider a Self-Directed SIMPLE IRA?
Your company has less than 100 employees.
You want a plan with low start-up and administration costs.
You’re looking to add a valuable plan to your benefits package to attract quality employees.
You want to contribute to your employees’ retirement and yet you want the flexibility to decide how much you contribute.
You do not have any other retirement plans.
Please consult your tax professional for the plan that best suits your individual needs.
Funding Your Self-Directed SIMPLE IRA
Employee elective deferrals (also referred to as salary reduction contributions):
• Limited to $14,000 for 2022 and $15,500 for 2023*
• For employees age 50 or over, a $3,000 “catch-up” contribution is also allowed for 2022 and $3,500 for 2023*
Employer must annually choose one of the contribution methods below. The employer must tell employees during the election period which method will be used for that year:
• 2% non-elective contribution – 2% of each eligible employee’s compensation regardless of whether or how much the employee deferred, or
• 3% matching contribution – match of employee’s elective deferrals on a dollar-for-dollar basis up to 3% of the employee’s compensation.
*Each employee’s total contributions are limited and subject to annual cost-of-living-adjustments.