In today’s video we will discuss the differences of SEP IRA vs SIMPLE IRA: Which is Best for Small Business?

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The SEP IRA:
Also called a Simplified Employee Pension Plan
Allows employer to setup traditional IRAs for themselves and employees
No limit on the size of the business, includes self-employed
Doesn’t have the startup and ongoing costs of traditional workplace plans (401k)
Only allows employer contributions, none from employees
All employer contributions must be equal to all eligible employees
There are max limits to eligibility:
Must be 21
Worked for employer for 3 of last 5 years
At least $650 in compensation per year
These are max limits. Employer can make these requirements less
Flexible contributions (great for good years, bad years)
Contribution limits:
Based on first $305k of compensation for 2022
Annual limits to the smaller of $61k or 25% of income
Employer can deduct contributions
Employee gets tax break (goes in pre-tax)
100% vesting immediately

The SIMPLE IRA:
Stands for Savings Incentive Match Plan for Employees
Allows both employers and employees to contribute
Great for smaller businesses (under 100 employees)
Employer required contributions:
Matching contributions up to 3% OR
2% nonelective contributions (employees don’t have to contribute)
Not flexible (set percentages)
Employee 100% vested at any time
Easy to set up

#sepira #simpleira #sepiravssimpleira #bestsmallbusinessretirementplan…(read more)

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