MONEY MATTERS: Simple IRA
Most all of us have participated in or at least heard of a 401k, but today we're going to be talking about a simple IRA. What is a Simple IRA?
That's a great question and what a Simple, it is very very similar to a 401k. Actually a Simple has a pension for small business owners, you can have up to 100 employees an have it and there's a Simple IRA and a Simple 401k. Generally, we use the Simple IRA version. Really, each employee is able to set up an account and they can decide how it's invested and the employer puts money on their behalf. There's some rules that follow for the employer. If I set one up for my group, I have to do one of two things. I have to put in 2 percent for everyone who works for me or I have to do a dollar for dollar match up to three percent for those who choose to participate.
Are there some rules as to who can be involved in this Simple IRA?
Pretty much everyone is its pretty liberal. If you anticipate that you're going to make $5000 dollars, you're eligible basically. As employee, I can put up $12,500 into the plan and then naturally I'd get my 3 percent match. If I'm over 50, there's a catch up prevision doing an extra $6000 as well.
Are there any limits as to where that money can be invested or how?
It's pretty much you can't do gold or art or that type of stuff. Generally, you set up a mutual funded account or a stock account.