Self-Directed SIMPLE IRA
A SIMPLE IRA plan is a cost-effective and hassle-free way for small- to medium-sized businesses to offer an employer-provided retirement plan to its employees. Created under the Small Business Job Protection Act of 1996, the Savings Incentive Match Plan for Employees (SIMPLE) IRA is open to employers with fewer than 100 eligible employees. Administrative costs are smaller than those of a 401(k) and there is no requirement to file annual financial reports to the IRS, making the plan less time consuming to maintain. SIMPLE IRA rules also permit sole proprietors and independent contractors without any employees to establish this type of retirement account for their own benefit. Many employer plans allow employees to select the financial institution which will administer their SIMPLE account. One thing that every person should know about retirement planning is that not all IRA trustees are the same. A CamaPlan self-directed IRA allows investors to choose from a myriad of assets, far beyond the typical mutual funds and stocks promoted by many financial institutions. Our accountholders invest in real estate, gold and silver, personal finance loans, mortgage notes, tax liens, commodities, futures, and many additional alternative assets, as permitted by IRS regulations. While many regular IRA providers hide administrative costs in the profits derived from the sale of financial products, CamaPlan has a clear annual account service fee structure, and no incentive to direct individuals to specific investments. Call CamaPlan today to learn how self-directed IRAs are the best retirement plans for investors who want to control their own money and plan for a secure financial future.
Employer-Sponsored IRA Plan Comparison
The good news for employers is that there are a number of options available when selecting a retirement plan for themselves and their employees. However, all of the choices can be confusing. Should you choose a SIMPLE IRA or a 401(k)? What about a SIMPLE 401(k), which is a subset of the 401(k) plan? How does the Individual(k) fit into all of this? Our goal at CamaPlan is to educate business owners and individuals about retirement planning so they can make informed decisions. The most frequently asked question is the difference between SIMPLE and SEP plans, both of which are intended to be affordable plans for small businesses. These are some of the key points to keep in mind:
- In comparing the SIMPLE IRA vs the SEP IRA, the SIMPLE is more heavily funded by employees who make salary reduction contributions, while the SEP IRA is primarily employer funded.
- The SIMPLE individual retirement account permits the employer to set higher levels of minimum employee income compensation for eligibility (up to $5,000 in the preceding 2 years) than the SEP.
- Business owners may be able to claim a $500 tax credit for start up costs during the first 3 years of either plan.
- SIMPLE IRA contribution limits can be found on the contribution limits page. Employer contributions for both types of plans are generally 100% tax-deductible, and provide immediate vesting for the employee.
- Unlike a SEP plan, the Savings Incentive Match Plan for Employees does not have a minimum age requirement, and the employer may not offer any other retirement plan.
- Participants in either SIMPLE and SEP IRAs may still contribute to a Traditional or Roth IRA, and all earnings are tax-deferred until retirement. A SIMPLE IRA calculator can help you compare and contrast retirement plan options.
Contact us for a free consultation to learn more about how SIMPLE IRA rules would impact your business.
How Contributions Are Made
SIMPLE IRA contributions are funded by a combination of salary reduction contributions and employee matching funds. Employees may make salary reduction contributions of up to 100% of their income, up to the SIMPLE IRA contribution limits. Individuals who are 50+ years may also make salary reduction contributions of up to $2500 to “catch up”. Employers have two options for plan contributions. They may either elect to contribute dollar for dollar matching funds up to 3% of the employee’s contributions, or they may choose to make non-elective donations to all employee SIMPLE plans at the rate of 2% of each person’s salary. The method of employer contribution may be changed from year to year. Employees must receive an employer statement explaining how contributions will be funded at least 60 days before the start of the annual employee election period. Rollover funds and additional contributions are not permitted to be deposited into the account, which can only have salary reduction contributions and employer contributions added to it (as well as earnings on the plan’s investments, of course).
Distributions from a SIMPLE plan are in some ways similar to a Traditional IRA. Because contributions and earnings are tax-deferred, the income tax is paid at the time of distributions from the IRA plan. Mandatory minimum distributions start at age 70 ½. Individuals may make withdrawals from their SIMPLE IRA plan at any time, however an early withdrawal penalty will be assessed if the person has not yet reached age 59 ½. In addition, the withdrawal penalty increases to 25% for distributions made within the first two years of participation in a SIMPLE plan (that is not true for a SEP IRA). Unlike 401(k)s, loans are not permitted from SIMPLE accounts. A SIMPLE IRA rollover from one qualifying account to another can be made without any early withdrawal penalties. Call CamaPlan to discover why we are the vanguard SIMPLE IRA providers, and discuss opening or rolling over your individual retirement account today.
By Investors, For Investors
Based in Pennsylvania, CamaPlan was founded by investors, for investors. We are at the forefront of providing self-directed IRA accounts for individuals who want to use their own knowledge and expertise to invest their retirement funds. Unlike typical brokerage houses that present a choice between one mutual fund or another as self-direction, CamaPlan offers true freedom. We believe that investors should have control over their own retirement planning and that nobody understands your personal financial goals better than you. CamaPlan provides investor education through our Cama Academy guide to retirement investment options series of webinars and classes to empower our clients to make informed investing decisions. There is much to know about retirement planning, and CamaPlan offers the personal attention and support needed to ensure that investors are on the path to financial freedom. Contact CamaPlan today to open a self-directed SIMPLE IRA and start growing your wealth.