The Not so Simple IRA


As an investor I’ve heard of 401k’s, Traditional IRA’s, Roth IRA’s, heck I’ve even discovered Keough’s and SEP IRA’s, but as my boss’ business banker spoke about our new retirement options at work, I discovered a whole new type of IRA.

The Simple IRA.

SIMPLE is an acronym for Savings Incentive Match PLan for Employees.

The ironic thing about the SIMPLE IRA, is it’s not so simple.  Here’s what I learned about this unique retirement contribution plan.

Simple IRA Basics:

  • Designed for Businesses with less than 100 Employees.
  • Max contribution per year is $11,500 (add another $2,000 if you’re over 50).
  • Max employer match is 3% (unfortunately).
  • It’s maintained on a calender yearly basis.
  • Stock choices and contribution amounts can be changed whenever.
  • An employee has to make at least $5,000 the past two years or is expected to make at least $5,000 in the calendar year.

Will the SIMPLE IRA affect my Roth IRA?

Apparently my contributions to the SIMPLE IRA will not affect my ROTH IRA contributions.  I will be able to max out both amounts.

The two year rule

What’s unique about the SIMPLE IRA plan is that there is a two year period after you stop participating, in which you’ll be taxed at a higher rate if you deduct funds from the account.

To hear it from the horses mouth, stop by the IRS Simple IRA page for the technical details.