Simple Retirement Plan? Is It Really Simple?

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Well simple is not the word we would use for the simple retirement plan. It is a savings plan that both employee and employer would benefit from. The employees would benefit because they would be offered provisions for a plan which offers tax deduction on their savings until the sum is withdrawn. The employer will benefit because of the fact that such provision would retain the most excellent workers and therefore the business would profit from an experienced staff.

IRA and a 401(K) to choose in the simple retirement plan

The simple retirement plan is in force as dictated by the Small Business Jobs Protection Act of 1996. Under this Act if you are employing up to 100 employees earning not more than US $5000 during the previous financial year, and they would not be part of any other retirement plan, you would be able to open for them either an IRA and a 401(K) plan.

These choices could be offered to the employees who could choose according to their personal choice. Under the simple retirement plan the employees could contribute up to US $6000 annually where the employer would need to match 100% their contribution which should not exceed three percent of the pay or be less than one percent. Alternatively, the employer could pay a standard two percent without the obligation of the employee to contribute anything. Employees can choose to opt out anytime during the year.

When it comes to the distributions of the simple retirement plan, these are subject to IRA rules and regulations and they are counted as income when they are cashed in. In case you want to save in tax, you could have tax rollover from one SIMPLE account to another SIMPLE account or directly to an IRA. Early withdrawals are not encouraged and as such these attract about 10-25% penalty when you do so.

Still Not Simple This Retirement Plan?

Although it is not simple this simple retirement plan the number one benefit from this plan is that you are saving for your retirement years and that you can defer taxes over your savings until you withdraw the amount of money saved.

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