Savings Incentive Match Plan for Employees (SIMPLE) IRAs for small businesses is a company-provided retirement plan that has tax advantages. Benefits include: low cost, easy to administer, easy to roll over into another tax-free IRA or SIMPLE plan and reduction of taxable income. Employees avoid paying taxes on the money placed in the SIMPLE plan until they decide to withdraw the funds, and employers receive deductions for money contributed.

Two types of SIMPLE plans available include a SIMPLE IRA plan and a SIMPLE 401(k) plan. If employees decide to participate in the SIMPLE IRA, they contribute a chosen amount of their salary, and that amount is either matched by the employer or some other agreed upon amount. The amount of contributions in one year changes every year, so check with the IRS for up-to-date information. To continue SIMPLE IRAs Education and Training, see the following information:

1. Sign up for SIMPLE IRA info training and education courses.

2. Find association and organizations that focus on SIMPLE IRAs for small businesses.

3. Check out do-it-yourself SIMPLE IRA information.

Action Steps
The best contacts and resources to help you get it done

Seek education and training to improve SIMPLE IRA knowledge and ability

Offer training for employees so that they better understand IRAs and they have an opportunity to ask questions relevant to their situation. Choose training companies that train to the ability of your employees and offer a format that works for your business. Many training companies tailor training, seminars, webinars, etc., so they are specific to your business needs.

I recommend: Wolters Kluwer Financial Services offers a variety of training options with seminars, software, webinars and custom designed training. See a calendar of education events with New York Bankers Association Online for more training opportunities. Principal Trust has webinars to educate employers and employees about IRAs. With a financial focus, the Center for Financial Training offers education and training in different formats focused on business finance and includes IRAs.

Find IRA associations and organizations to assist with your SIMPLE IRA plans

There are associations and organizations available for your business' questions and concerns about setting up and maintaining employee IRA accounts. Many offer education, guidance and articles that support small business efforts to improve employee benefits. Take the time to explore options in your area and on the national level.

I recommend: For education about a self-directed IRA or a solo 401 K, check out the articles and classes offered by the IRA Association of America. The Employee Benefits Security Administration, a branch of the United States Department of Labor, is an organization with offices in your state to assist with employee benefits.

Set up SIMPLE IRA plans with a do-it-yourself education

There are websites that help you set up a SIMPLE IRA account for each employee. They offer systematic information on how to get started and complete the set up process. The information offered educates you on every aspect of successfully providing an IRA account for your employees and often provides a FAQs page for commonly asked questions.

I recommend: For information and guidance in setting up a SIMPLE Plan, see money-zine.com. This page with the Internal Revenue Service shows how to establish a SIMPLE plan guide. The United States Department of Labor explains the SIMPLE plan, points out advantages, and has instructions for beginning a SIMPLE plan.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Review specific SIMPLE IRA info and requirements before you choose one, consider the average age of your employees, if you want loans allowed in the plan, and other details.

Access to a variety of tax-advantaged retirement plan choices is one of the key perks of self-employment. There are several good options that are easy to set up and cheap to maintain, including the SIMPLE IRA, Simplified Employee Pension IRA (SEP-IRA) and Solo 401(k).

These plans all offer tax-deductible contributions. And money inside the plans grows tax-free until you take it out. Three keys to finding the right one:

1. Retirement plan choices for the self-employed all have key differences, so you need to investigate carefully which one is right for you.
2. The most significant differences are: how much money you can put in and what happens if you add staff later on.
3. According to the American Institute of Certified Public Accountants (AICPA), you can't fully fund more than one in a single year, so you need to make a wise choice.

Action Steps
The best contacts and resources to help you get it done

Fly solo with a 401 (k)

The Solo 401(k) is great if your business is raking it in and you need to catch up on retirement savings. A generous contribution formula lets you sock away a larger portion of earnings at a lower income level than with other plans. You can also borrow against a Solo 401(k) -- handy if you fear locking up your money long term.

I recommend: AICPA has complete Solo 401 (k) details in a great site called 360 Degrees of Financial Literacy. The IRS has a good PDF download 401 (k) Plans for Small Business. The 401 (k) Help Center is a terrific place to discover plan details and download a Directory of 401 (k) plan providers. The Small Business Channel has advice on how to choose the best plan and find plan vendors. See how much you can contribute to a Solo 401 (k) with a contribution calculator. Do it all online with The Online 401 (k) for small business.

SEP-IRAs work for one-person shows

The SEP-IRA is great if you run a one-person show and intend to keep it that way. Open one at virtually any bank, mutual fund company or brokerage firm. The contribution limit is 25 percent of net income up to $44,000 (adjusted periodically for inflation). If you hire help later, however, funding rules can make this plan costly, and loans are not allowed.

I recommend: One appealing SEP-IRA feature is funding flexibility. These plans let you wait until you file your taxes to fund the plan. So if your income turns out to be higher or lower than expected, you can adjust your contribution to fit. See how a SEP plan works and how to establish a SEP.

Get sophisticated pension power with a SIMPLE IRA

The SIMPLE IRA is good for entrepreneurs who aspire to run bigger businesses.

I recommend: Even if you add employees, you can keep the same plan. But "SIMPLE" stands for "savings incentive match plan for employees," so you will have to match employee contributions up to three percent of pay. AICPA has complete SIMPLE IRA details. Also check how a SIMPLE IRA works and how to establish a SIMPLE IRA.

See side-by-side comparisons

Plan features are different, and confusing. See how they stack up.

I recommend: The IRS publication Choosing a Retirement Plan Solution for your Small Business (PDF) has handy side-by-side comparison charts that can help you choose the best plan for your needs.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  As a supplement to a SIMPLE plan, consider adding a Roth IRA. While the Roth isn't really a business owner plan, it's a great option if you have more savings available after fully funding a SEP, Solo 401(k) or Simple IRA. You can put the maximum $4,000 into a Roth ($5,000 if 50+) if your adjusted gross income is under $110,000 ($160,000 for married couple). You get no tax deduction for the contribution, but money grows tax-free and withdrawals are tax-free in retirement.
• •  If your business is really booming and you want to set aside even bigger dollars, consider a profit sharing plan. This option is more complex and it's a good idea to talk with a CPA or other retirement plan expert about setting it up.
• •  One drawback of the SIMPLE IRA is a low contribution limit. You can stash away no more than $10,000 per year ($12,500 if you are 50 are older), which might be too little.