(FinancialHealth.net) – When it comes to retirement savings, getting the most out of your hard-earned money is something to strive for. This starts with signing up for an account that takes the guesswork out of investing. A SIMPLE IRA does just that, especially if you work for a small business. Here’s why.
What Exactly Is a SIMPLE IRA?
SIMPLE stands for Savings Incentive Match Plan for Employees. It works similar to a traditional IRA and 401(k) plan but for small companies that may have few employees. Employees add a portion of pre-tax dollars to the account and employers match or add a percentage of that amount.
Why Small Businesses Love SIMPLE IRAs
Startup costs for SIMPLE IRA plans are often lower than a traditional 401(k). They also tend to be easier to manage than some of the more complex retirement accounts that require more than one financial advisor to manage packages for employees.
The Basic Rules of a SIMPLE IRA
Like other retirement plans, there are some basic rules to follow.
- All contributions are tax-deferred and this reduces annual taxable income. When tapping into the amount at retirement, you’ll have to pay taxes with each withdrawal.
- There is no vesting period. This means as soon as you contribute, the money is yours.
- Another big benefit is having a predetermined amount withdrawn straight from your paycheck directly to the investment account along with the employer’s contribution.
This plan takes the guesswork of deciding where to put your money and having to choose factors such as a specific stock, making it an easy investment choice.
Combining It With Other Plans
If the company you work for offers a SIMPLE IRA, don’t hesitate to sign up even if you currently already have an IRA through another employer or a previous one. The IRS allows individuals to invest in multiple retirement accounts while having a SIMPLE IRA without facing harsh penalties.
When to Open One
The best time to open a SIMPLE retirement plan is right now. It’s never too early to plan for the future. The longer you have this type of account, the more money that you and your employer generate and the bigger your nest egg gets!
There are many ways to save for retirement and different plan options to consider if you work for a small corporation. Finding one that is easy to manage makes things less complex. Check out a SIMPLE IRA and see if it has the right benefits you are seeking for a long-term investment.
~Here’s to Your Financial Health!
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