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Is SIMPLE IRA Or 401K Better for Your Small Business?

Is SIMPLE IRA Or 401K Better for Your Small Business?

In setting up a retirement plan for a company, business owners may go back and forth in deciding between a SIMPLE IRA (Savings Incentive Match Plan for Employees) and a 401k plan. Both have their benefits and potential risks. So, which is the better option for your business?

What Are The Differences Between a SIMPLE IRA And a 401k Plan?

 According to plan provider Ubiquity, while there are similarities in each plan structure, there are important key differences in contribution limit, number of employees, tax considerations, employer contribution, loan access, and setup/maintenance that should be considered by every employer when he or she is considering implementing a retirement plan. Note that the following is not an exhaustive list of the differences between the two plans, but is intended to provide general guidance.

Which Option Is Best for My Business?

 Every business will have its own unique needs when it comes to retirement plans. It’s important that business owners closely analyze their company setup to determine the number of employees, the business’s financial status, and how these factors may affect their final decision.

In general, a 401k plan will offer more flexibility and typically will result in greater value both for employers and employees. However, if you run a very small company, you may consider the “easier” option of a SIMPLE IRA. It is a good idea to discuss your individual business needs with a financial professional before making any decisions about a retirement plan.

 

 

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