Simple IRA Rules To Remember
There are some SIMPLE IRA rules to remember if you have one of these retirement accounts. A SIMPLE IRA is a Savings Incentive Match Plan for Employees, and is a type of IRA available to small businesses. This means the business can not have more than one hundred employees. Another rule that should be remembered is that any employee must expect to receive at least five thousand dollars in compensation during the current year, and this amount over the last two previous years combined as well. The SIMPLE IRA rules also include rules which make withdrawals more difficult than with many other types of retirement accounts.
SIMPLE IRA contribution limits are set at $11,500, but there are additional annual contributions allowed up to another $2,500 if you are at least fifty. There are certain withdrawal restrictions as well, because if you withdraw within the first twenty four months after the account is established the early withdrawal penalty is twenty five percent instead of the usual ten percent. SIMPLE IRA rules also state that your employer must match your contributions up to the specified amount. When weighing the options of a SEP IRA vs SIMPLE IRA it is important that you understand the rules for each plan, so you can make the best choice possible.
The SIMPLE IRA rules are not difficult to understand, and this type of retirement plan is a very popular choice. This type of account should not be touched though, especially in the first two years, or the tax and penalty consequences are much more severe than those of other plan types. This is true of any spousal IRA as well. You can control the investments made with your money, and that offers a benefit that many retirement plans does not. In addition the employer match required means you get free money added to your account, so your retirement savings grow faster.