401k Retirement Plans: Is This The Right Plan For You?There are various, different retirement plans that are available for use by small businesses, and each plan is unique in how you can handle it. It is important that you know the differences between the plans before you decide which plan is the right one for your small business. Both 401k retirement plans and Simple IRA's are popular choices for small companies, and while many think that they are the same, they have various differences. A Savings and Incentive Match Plan for Employers, or Simple IRA, does have some likenesses to the 401k retirement plans. Apart from being qualified retirement plans, both of these plans allow both the employee and the employer to contribute to a savings plan, and the money contributed is tax deferred. Although they are alike in this manner, the Simple IRA is much easier on the administrative side than a 401k plan. One of the key differences of these retirement plans is the requirements for the size of the business. Simple IRA's require the business have no more than 100 employees, while there is no specific amount of employees listed for businesses to have a 401k program. For a business that is growing and planning to have more than 100 employees quickly, choosing a 401k program may be the best alternative. While you have two years to change your accounts over after you have more than 100 employees, this can be a hassle, so you may want to expect growth and start out with a 401k plan. Another key different is that Simple IRA's are much more difficult to roll over into other plans. A Simple IRA rollover to a traditional IRA cannot be done without a two-year waiting period without a penalty. On the other hand, a 401k plan can be rolled over to a traditional IRA at any time. For older employees, the differences between the two plans can be crucial. A 401k allows employees that are over 50 to contribute $5,000 more each year, but a Simple IRA only allows those trying to catch up to contribute $2,500 more each year. When you are considering whether you want to use Simple IRA's or 401k retirement plans for your small business, you need to consider the participation levels of your employees. 401k programs are more attractive when you have high participation. On the other hand, if you find the costs of having a 401k are prohibitive for your small business, then having a Simple IRA plan may be the best for you. If you have some questions whether the 401k retirement plans or the Simple IRA's are best for your small business, you may want to talk with a financial or tax adviser. They can look over your finances and the specifics of your business to help you make the choice that will best benefit both you and your employees. Simple Ira >> Privacy Policy >> Terms Of Use >> Disclaimer >> About Us >> Contact Us |