The Savings Incentive Match Plan for Employees (SIMPLE IRA) is a retirement savings plan designed specifically for small businesses and their employees, offering a simplified alternative to a 401(k). Similar to traditional IRAs, the power of compound interest makes early contributions to a SIMPLE IRA, a highly effective way to save for retirement.

The average SIMPLE IRA balance was around $53,000 in 2023. (Q4 2023 Retirement Trends - Fidelity)

To be eligible for a SIMPLE IRA, you must:

• Be a full-time employee of a small business that meets certain criteria, such as having fewer than 100 employees.
• Hav worked for the employer for at least two years and earned at least $5,000 in wages during the previous year.

Note that specific eligibility requirements may vary depending on the SIMPLE IRA plan selected by the employer.

Unlike traditional IRA contributions, which are made only by individuals, SIMPLE IRAs allow contributions from both employees and employers.

• Lower administrative costs, making it a more affordable option for small businesses.
• Employers can deduct their contributions to the plan, while employees can contribute pre-tax dollars, thereby reducing their taxable income.
• Higher contribution limits compared to traditional IRAs, making SIMPLE IRAs particularly advantageous for individuals seeking to maximize their retirement savings.

The average amount Americans saved for retirement in 2022 was $5,011. (What Are SIMPLE IRAs? Pros & Cons of the Retirement Plan (business.com)) If you leave your employer, you can generally roll over your SIMPLE IRA balance into another retirement account, such as a traditional or Roth IRA.

The SIMPLE IRA combines the advantages of pre-tax contributions with higher contribution limits than traditional IRAs, making it an affordable and accessible retirement savings option for small businesses and their employees. This planreduces administrative costs for small businesses.