Single Point of View

Single Point of View is our way to occasionally share planning ideas relating to personal finance. Our goal is to pass along concepts that you may not be exposed to on a daily basis.

DEADLINE: Switching from a SIMPLE IRA plan to a 401k

So here are the numbers for 2015: If a company currently has a SIMPLE IRA plan, the employee can defer up to $12,500/yr., plus an additional $3,000 if they are over age 50. The employer can choose to make a 2% non-elective contribution (more about this at the IRS website ) or match employee contributions, up to 3% of compensation

SIMPLE IRA Summary: The absolute maximum combined employer and employee contribution is $31,000

 
In a variation of a 401k plan, you can defer up to $18,000,  plus an additional $6,000 if you are over age 50. Employers can contribute additional funds, such as matching contributions and profit sharing.

401k Summary: The absolute maximum combined employer and employee contribution is $59,000
 
This can all be fully tax deductible if you wish.
 
For those that have a SIMPLE IRA plan in place now, and want to switch to a 401k, here are items to consider: 
 
-You cannot maintain a SIMPLE IRA and 401k in the same calendar year
-Employees must be given notice 60 days in advance of this type of change (November 1 for a January 1 switch)
 
If you think you may benefit from making this switch for next year, now is the time to do the math. 
 
 
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Monday, 25 September 2017