How SIMPLE IRA Matching Works
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- Опубликовано: 3 авг 2024
- 2021 Financial Planning Cheat Sheet www.theastuteadvisor.com/2021...
SIMPLE IRA matching can be confusing. This video will explain how SIMPLE IRA matching works for employees and employers. SIMPLE IRA plans can be a great way for a small company to provide a low cost retirement benefit as an alternative to a qualified retirement plan like a 401(k) and profit sharing plan. SIMPLE IRA stands for Savings Incentive Match Plan for Employees. However, calling it simple is probably a misnomer.
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⚠ Please don’t take this video as specific advice for your specific situation. Consult your own tax, legal and investment advisors. 👍
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Very clear and to the point
Thanks. This is very clearly done and kudos for an excellent delivery, excellent video. I would love to see this expanded. You didn't cover a partial year, such as often happens the first year, nor did you cover how payroll companies handle the details. If 3% elective and employees contributes 5% do you dollar for dollar match all of it each payroll and then stop matching when the cap reached? That means company matchews are heavier in beginning of year until cap reached. Or maybe the payroll company gives you the option. What about partial year, suppose plans started July 1. 3% elective case and someone contributes 10%. Do you match 3% each payroll and then do a "true up" soon after Dec 31? I am in the business, but I've not found good explanations for these situations. Appreciate your insights and congrats again on a very clear and well designed video.
Mr Waldrop, thank you for the detailed explanation. I loved the way you presented it. Can you tell me what the difference is between a company sponsored IRA that does not match, as opposed to getting it from a broker?
Thank-you!!!! Strait to the point!!
Thank you very much. Clear and concise. Great presentation.
Thank you Tim. I'm glad you found it helpful.
Great explanation David! The non-elective vs. elective match is a topic that has confused me in the past (and that's what I use for my practice!). I'll share this with some of my CPA friends.
Thanks Devin!
Very clearly explained man...broken down like a shotgun
Thanks so much. I'm glad you found it helpful.
Thank you. Great video, explained in a way that was easy to understand.
Glad it was helpful! I’m so sorry I’m seeing this just now. I wasn’t getting the notifications for some reason. I’ve got a lot to reply to. If you download my 2023 Financial Planning Cheat Sheet, I will be able to respond directly via email. Here’s the link: www.theastuteadvisor.com/2023cheatsheetLP
Very easy to understand even for non-English speaker. Thank you very much!
You are welcome! I’m so sorry I’m seeing this just now. I wasn’t getting the notifications for some reason. I’ve got a lot to reply to. If you download my 2023 Financial Planning Cheat Sheet, I will be able to respond directly via email. Here’s the link: www.theastuteadvisor.com/2023cheatsheetLP
Great explanation! Thanks for doing this video
Very helpful, thank you!
You're welcome. I appreciate the kind words.
Thank you
You're welcome!
Very helpful! I just spent 4 hours trying to find this answer by calling Vanguard and IRS…clueless
Thank you. I'm glad I could help. My clients have found this cheat sheet helpful too: www.theastuteadvisor.com/2022cheatsheet
super helpful
Glad to hear! I’m so sorry I’m seeing this just now. I wasn’t getting the notifications for some reason. I’ve got a lot to reply to. If you download my 2023 Financial Planning Cheat Sheet, I will be able to respond directly via email. Here’s the link: www.theastuteadvisor.com/2023cheatsheetLP
Helpful!
Thank you! I’m so sorry I’m seeing this just now. I wasn’t getting the notifications for some reason. I’ve got a lot to reply to. If you download my 2023 Financial Planning Cheat Sheet, I will be able to respond directly via email. Here’s the link: www.theastuteadvisor.com/2023cheatsheetLP
Nice presentation! It’s hard to find any information on this plan.
Thanks so much! Make sure to access my 2021 Financial Planning Cheat Sheet for more info www.theastuteadvisor.com/2021cheatsheet
Thank you! What if my salary fluctuates? How do they decide what 3% is? Do they look at the previous year, last few months? Great video!
Hi Tara, thanks for the question and contributing to the conversation. Employers can wait until after the calendar year has ended to make the contribution. For example, your income can fluctuate throughout the year, but once Jan 1 roles around again, your total annual salary is known and is basis for the 3% matching. However, some employers match as you go. Let's say you earned $5,000 this month, the matching would be 3% or $150. Next month you made $6,000, match would still be 3% or $180. This assumed you are contributing at least 3% of your pay. Be sure to get my 2020 Financial Planning Cheat Sheet located here www.theastuteadvisor.com/2020cheatsheet
On this, if the employee received/earned some unexpected bonus, would that be added to the total matchable amount?
Do all the same rules apply when you are your own employee? I can contribute up to the max from the employee side plus 3% of compensation from the employer side?
Yep! There are some limits to be aware of, but you got the gist of it. Be sure to get my latest financial planning cheat sheet. www.theastuteadvisor.com/2021cheatsheet
In an elective plan, does the employer have the option to exceed the 3% match or to provide the match at any level even if the employee does not contribute?
My apologies for the delay in answering your question. Thank you for asking. My understanding is that the employer can NOT contribute more than 3% of compensation. If someone else can source an answer different from this, please post it here. Also, to clarify your question, when the employer offers elective matching, the employer is only required to match those who contribute. Under non-elective, everyone receives an employer contribution of 2% of compensation whether they contribute or not.
My employer set up a simple IRA since Jan 2016. He contributed 3% for only one year. I have been contributing up to now and she never match for the past three years. I am planning to resign and is there a way that I will get the past matching?
Hi James, I'm sorry to hear this. You may want to review this link from the IRS site and reference the sections that apply to the employer. I would contact your employer have them explain why there wasn't any matching. There are certain instances where the employer can temporarily reduce or discontinue matching. However, they must notify participants/employees and can only do so according to a specific set of rules. www.irs.gov/retirement-plans/simple-ira-plan-faqs-contributions
You should also check out my 2020 Financial Planning Cheat Sheet (linked below). It’s been updated for the new retirement rules taking effect this year. www.theastuteadvisor.com/2020cheatsheet
how is this different from a 401k
Hi Jordan, Thank you for the question. SIMPLE IRAs are similar in some ways to a 401(k) yet very different in others. I have several articles on my site about 401k plans at www.theastuteadvisor.com
What if I max out early in June and hit my contribution limit of $14k, would I still get the full 3% that the company is supposed to match (Company matches 3% with every paycheck) or do I lose out on the full 3% match because I maxed out early??
I’m so sorry I’m seeing this just now. I wasn’t getting the notifications for some reason. I’ve got a lot to reply to. If you download my 2023 Financial Planning Cheat Sheet, I will be able to respond directly via email. Here’s the link: www.theastuteadvisor.com/2023cheatsheetLP
I'm a small business owner with 2 full time employees, husband and wife, and 4 part time employees. I opened a simple IRA plan 9/15/2020. If my husband’s annual salary is $100,000, can he deposit full $13,500 maximum contributions for 2020 at one time in December and employer matching another 3% ($3000) in December?
Or he can only deposit from his paycheck bi-weekly and have the employer matching bi-weekly?
My goal is to put the maximum contribution. How can I do that? Your help is greatly appreciated.
Hi Elda, that's a great question and thank you for contributing to the conversation. The main thing is establishing the plan by 10/1 of the year you wish to participate. Since you did that on 9/15 you are good to go for funding in 2020. The contributions do not need to be at each pay period. It can happen once as you stated. However, there are other considerations especially since you have part time employees. Let me know if you'd like to set up a consulting call where we discuss this in more detail. In the meantime, be sure to get my 2020 Financial Planning Cheat Sheet located here www.theastuteadvisor.com/2020cheatsheet
What if an employee is part of profit sharing. The profit sharing is calculated at the end of the year. Once profit sharing is disbursed, the employees total compensation includes that profit sharing correct? Now the 2% match has to be adjusted to include the profit sharing. Once the 2% is contributed the Simple IRA, the profits have to be adjusted and the amount of profit sharing to the employee is also adjusted. See how this is an iterative and circular issue? How is something like this handled?
Hi Joseph, thank you for your question and contributing to the conversation. Employers can NOT offer both a profit sharing plan and a SIMPLE IRA in the same year.
David N. Waldrop, CFP® ...that is good to know. Can employers still give employee bonuses while
Implementing a Simple IRA?
@@civilwheelier1 Great question! Yes. The bonus is included in total compensation.
@@civilwheelier1 You should also check out my 2020 Financial Planning Cheat Sheet (linked below). It’s been updated for the new retirement rules taking effect this year. www.theastuteadvisor.com/2020cheatsheet