Unlocking the Secrets of SIMPLE IRAs: A Super Guide for Everyday Savers

Are you itching to supercharge your retirement savings? Enter SIMPLE IRAs, the superheroes of Individual Retirement Accounts, allowing you to contribute more than the typical $5,500 limit. They might sound complex, but fear not – we're here to break it down for you in simple terms. Picture them as the friendly, approachable cousins of 401(k) plans, providing a flexible and accessible avenue to bolster your financial future.

The Basics

Unlike 401(k) plans, SIMPLE IRAs involve individual contributions rather than a trust. Let's dive into the ground rules:

• Contribution Limits: You can stash away up to $12,500 of your earned income in a SIMPLE IRA. And guess what? If you're a wise owl aged 50 or older, you get to throw in an extra $3,000 as a "catch-up" contribution.
• Employee Contributions: If you're a business owner, you have choices. You can opt to contribute 2% of each employee's earnings, whether they join the savings party or not. Alternatively, you can be a true team player and match 100% of participating employees' contributions, up to 3% of their earnings. Feeling a bit conservative? You can scale down the match to as low as 1% for two out of every five years.
• Timing is Everything: Your matching contribution is due when your business tax return is filed, extensions included. Keep an eye on the calendar to make sure your financial support arrives fashionably on time.
• Employee Eligibility: You're not alone in this venture. Include employees earning at least $5,000 in any two preceding years and expected to make $5,000 this year. It's about building a collective nest egg for everyone.
• Account Handling: Participants get to play captain of their own financial ship by establishing and managing their SIMPLE IRA accounts. Whether you designate a single financial institution or let your employees take the helm, the choice is yours.
• Administrative Perks: Forget the paperwork hassle. SIMPLE IRAs spare you from annual administrative and reporting requirements, making them the laid-back option compared to other qualified plans.

Why Opt for SIMPLE IRAs?

Are you a small fish in a big pond, running a low-income venture, or navigating the complexities of an S corporation to dodge hefty self-employment taxes? SIMPLE IRAs might be your golden ticket. Unlike their SEP IRA or qualified plan counterparts, contributions to SIMPLE IRAs aren't restrained by a percentage of your income. Plus, if you're feeling entrepreneurial, you can bring your spouse on board, pay them a token salary, and funnel it all into the plan. Talk about a family-friendly retirement strategy!

Tax Savvy Strategies

For the tax aficionados out there, here are a couple of savvy maneuvers:

• Rothify Your SIMPLE IRA: If you qualify for a SIMPLE IRA and dream of the Roth's tax-free future, you're in luck. Make your deductible SIMPLE contribution, exercise patience for two years, and then transform the account into a Roth. It's like giving your retirement savings a tax-free makeover.
• Balance Your Deferrals: If you're juggling multiple retirement accounts, especially your employer's 401(k) or 403(b) plan, remember this crucial tip. The combined deferrals from your employer's plan and your SIMPLE plan can't surpass the overall limit, set at $18,500 for 2018. Prioritize contributions to the plan with the juiciest employer match before spreading your wings to other accounts.

SIMPLE IRAs are not just retirement savings accounts; they're superheroes on a mission to make your financial future brighter. With straightforward rules, flexible contributions, and tax-savvy strategies, they offer a simple yet powerful tool for individuals and small businesses alike. So, seize the opportunity, contribute wisely, and let your SIMPLE IRA pave the way to a comfortable and stress-free retirement!

If you would like some help with understanding your financials and what you can do to increase the cash you get from your business, you can set up an appointment for us to chat about your business and how I can help you here:? https://calendly.com/pedenaccounting/right-fit-meeting