SIMPLE IRA
A SIMPLE IRA is a small business retirement plan that allows employees to make payroll deferrals while requiring the employer to contribute (either matching or nonelective, depending on plan design).
The core idea (in plain English)
Employees can save through payroll. The employer helps fund the plan under required contribution rules.
How it works (high level)
- Employees defer part of pay into the plan.
- Employer contributions are required under SIMPLE rules.
- Assets grow tax-deferred; withdrawals are generally taxed as income.
Withdrawal considerations
Early withdrawals can be penalized. SIMPLE IRAs often have special early-period rules that can increase penalties during the first years of participation (confirm current rules).
Common pitfalls
- Underestimating required employer contribution costs.
- Taking early withdrawals without understanding penalties.
If you want an easier-to-administer workplace plan and can handle required employer contributions, a SIMPLE IRA can fit — but withdrawal rules can be unforgiving early on.
Educational only. Always confirm eligibility, limits, and plan rules with IRS guidance or plan documents.