When a Simple IRA Is Right for You Part Two
June 2nd, 2007
When a SIMPLE IRA is right for you � Part Two
© Copyright 2006 by Frank Mitchell
The SIMPLE IRA is the most flexible
Flexibility is also another key factor. Assuming you are self employed, you are the one who gets to choose the structural layout, and even change it from time to time if you want. The SIMPLE IRA plan will appeal to you for this reason, because you get to have complete control. If you’re just starting up your business and can’t afford to put much the first year’s revenues into a retirement plan yet, then you, as the employer, don’t even have to match any of your employee’s salaries… Just let any and all employees contribute their own salary at their own rate, and then start up the matching program some other year!
When your profits are up, you get to choose a fixed 2% matching plan to all employees (even if that’s still just you) or a per-employee plan where you can choose how much, up to 3% matching, that each employee should get. That allows you to base benefits on seniority or performance. Quite clearly, this is the most flexible employee retirement plan for the majority of small businesses and the self-employed.
Here are the complete parameters for the SIMPLE IRA plan, including the limits and dollar amounts for the calendar year 2006. Keep in mind that the amounts grow a little every year, comparable to the rate of inflation.
Employer requirements for a SIMPLE IRA:
* SIMPLE plans must be maintained on a calendar year basis.
* SIMPLE plans must be established by October 1 to ensure contributions to be made for the current year unless the employer is newly created.
* An employer is only eligible for the plan up until it grows larger than 100 employees.
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