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Video instructions and help with filling out and completing simple ira 2021
Today we're gonna talk about this simple IRA if you're a small business owner that wants to reduce taxes offer a retirement plan increase employee retention and wants to control the costs of the bottom line this video is for you if you're new to our channel or haven't subscribed be sure to click on the bell at the bottom my name is Travis sickles certified financial planner with sickled hundred financial advisors the simple IRA stands for savings incentive match plan for employees IRA individual retirement account this is one of the simplest retirement accounts that you can open up for your small business because there's not a whole lot of filing documents required it's actually only one of two it's the 5305 - simple or the 5304 - simple one of the two that you need to fill out in order to start the plan the simple IRA contributions are pre-tax so they're actually going to reduce your overall tax liability as an employer or an employee you can contribute up to twelve thousand five hundred if you're under the age of 50 and if you're 50 or older you can contribute an additional three thousand think they call it a catch-up contribution and that's going to be three thousand in addition to the twelve thousand five hundred so a total of fifteen thousand five hundred into the simple IRA in 2021 this simple IRA has two ways of employer contributions into the plan and this is decided when you start the plan the first way is looking at the two percent non elective contributions and what this is is two percent whether or not the employee contributes on their side at all so if the employee makes fifty thousand dollars and you have a 2% non-elective on the simple plan you'd contribute a thousand dollars on an annual basis whether or not the employee also contributed the second choice would be the three percent elective contribution and on the three-percent elective contribution the employee also has to contribute into the plan in order for you to also contribute the other 3% so the most you'd contribute is an additional 3% if the employees also contributing 3% with the simple IRA if an employee is making $50,000 and they want to contribute up to 3% if they contribute the 3% that would be $1500 therefore with the 3% elective contribution then the employer would also have to match a hundred percent of that 3% at $1,500 if the employee contributed less then the employer would also contribute less so it's a dollar for dollar match up to three percent anything that the employee contributes above the three percent would not be matched by the employer a key benefit of using a simple IRA versus using a traditional IRA or a Roth IRA is the contribution limits are significantly higher when you're looking at a traditional or a Roth IRA those limits get capped at 5500 and 6500.