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How to Set Up a SIMPLE IRA Plan Today Thumbnail

How to Set Up a SIMPLE IRA Plan Today

By Trent Derrick, CMT®

Small business owners enjoy a number of retirement plan options these days. Your challenge is no longer finding a plan, but, rather, deciding which plan is best for your specific company.

One of the most popular retirement plans available is the SIMPLE (Savings Incentive Match Plan for Employees) IRA. In this guide, we’ll explore the benefits of the SIMPLE IRA plan and how you can take the first steps to set up the plan today.


A SIMPLE IRA is an employer-sponsored defined-contribution retirement savings plan. Participants can set up an automatic payroll deduction to contribute money on a tax-deferred basis. However, funds cannot be withdrawn before age 59½ without facing a 10% penalty.

SIMPLE IRAs allow for employer contributions in addition to employee deferrals. These contributions provide a business tax deduction for the sponsoring company. Even though SIMPLE IRAs are a form of IRA, participants are still able to contribute to a personal IRA.

There are many benefits to starting a SIMPLE IRA plan, including:

Lower Startup Costs

SIMPLE IRAs are quick and easy to set up since all they require is a one-page IRS form, whereas other plans require multi-page documents that spell out specific terms and conditions. Because of this, SIMPLE IRAs also have much lower startup costs than other retirement plan options. In addition, you may be able to claim a tax credit for your startup costs if you meet certain eligibility requirements.

Meant for Small Businesses

SIMPLE IRAs are basically simplified versions of other, more complicated employer-sponsored retirement plans. They are meant for small businesses with less than 100 employees and can be used for any type of company, in any line of business as long as the employee count is not exceeded. 

Employee Retention

Smaller companies want to reward their employees for their hard work but often think that a full-fledged retirement plan is out of reach. With a SIMPLE IRA, you can provide a great retirement benefit for employees (and yourself) without the hassle and expense of a 401(k). This is a good way to display a commitment to your employees and improve retention rates.

Lower Advisory Costs

When compared to other retirement plans, SIMPLE IRAs have much lower advisory costs. I only charge .25% to advise on these types of accounts.

Employer Contributions

SIMPLE IRAs have strict rules regarding employer contributions, which are mandatory. They either have to give a 3% match to every plan participant or make a 2% nonelective contribution for every employee earning over $5,000. The good news is that employer contributions are tax-deductible!

How to Set Up a SIMPLE IRA Plan

There are three formal steps involved in setting up a SIMPLE IRA plan: (1)

  1. Execute a written agreement to provide benefits to all eligible employees.
  2. Provide plan details to employees.
  3. Set up an IRA account for each employee.

But when you work with me, all you need to do is notify your payroll company so that employee deductions can begin. My team will do all of the legwork in terms of setting up the accounts and formalizing the documentation.

Get Started Today

If you’re a small business owner looking to start an employer-sponsored retirement plan, a SIMPLE IRA may be the right choice for you. To learn more about your retirement plan options and how I can help you implement and manage your plan, book a consultation with me here or email me at trent@legacywm.com.

About Trent

Trent Derrick is a financial advisor and Chief Market Technician at Legacy Wealth Management. Trent is passionate about the value small businesses bring to their communities and specializes in serving small business owners by providing seamless financial advisory services tailored to their financial needs, including tax planning, cash flow management, retirement planning, and bookkeeping. Trent has a bachelor’s degree from the College of Charleston and studied economics at the University of South Carolina, Columbia. He is a Chartered Market Technician® (CMT®) professional. Trent serves as a guest lecturer for the College of Charleston’s MBA program and acts as chairman of the Market Technician Association’s Charleston chapter. When he’s not working, Trent, a proud Eagle Scout, enjoys volunteering with the Charleston Animal Shelter’s outreach program. Trent and his wife love to cook international cuisines and host dinner parties with their friends. To learn more about Trent, connect with him on LinkedIn.


(1) https://www.irs.gov/retirement-plans/plan-sponsor/simple-ira-plan