Do you own a small business and want to offer your employees retirement benefits? Or are you self-employed and interested in opening a retirement account? With a SIMPLE IRA plan, retirement savings can be more accessible for everyone. Learn about the important details of these accounts and how to begin.
What is a SIMPLE IRA?
The SIMPLE IRA is a retirement savings option designed for self-employed individuals and small business owners. Employers with less than 100 workers are eligible to provide these accounts to their employees, along with contribution matching incentives. Also, several individuals utilize IRAs for tax-related benefits.
When you contribute to a Traditional IRA, you don’t pay taxes immediately, and during retirement, you may pay less taxes when the funds are distributed. This is because retirees are generally in a lower tax bracket, which means lower tax rates on distributions.
Another option available is a Roth IRA. Although contributions made to this retirement account are subject to taxation, individuals generally will not incur taxes on distributions taken upon reaching retirement age, which includes capital gains and dividends. Roth IRAs are an ideal choice for investors who experience considerable gains on their capital and wish to evade taxes in the future. Nevertheless, taxes may come as a surprise for some IRA holders.
How Does a SIMPLE IRA Work?
Employers may establish a retirement plan for themselves and their personnel via a SIMPLE IRA. Certain business owners and freelancers utilize the SIMPLE IRA option to create retirement plans for themselves. This type of account has reduced administrative expenditures in comparison to 401(k)s, making them ideal for small companies with fewer employees. Workers who meet the requirements can contribute to their salaries, and their employer must either make a matching or non-elective contribution. The maximum contribution limits are determined yearly by the IRS, with frequent adjustments made based on inflation and other factors.
SIMPLE IRA vs. 401(k)
Both SIMPLE IRA and 401(k) accounts share the common objective of enabling employees to save on taxes while simultaneously enlarging their portfolio. Nevertheless, a 401(k) option surpasses a SIMPLE IRA plan due to its higher salary reduction contribution limits. In fact, a 401(k) plan allows holders to deposit a maximum of $22,500 in 2023, whereas SIMPLE IRA investors can contribute only up to $15,500 during the same year. Additionally, 401(k) plans also offer greater catch-up contributions, allowing anyone 50 years or older to include an additional $7,500 annually, whereas SIMPLE IRA investors can add a respectable yet lower amount of $3,500 each year.
Small enterprises consisting of fewer than 100 workers generally opt for SIMPLE IRAs as they have lesser administrative expenses. Although 401(k) plans offer greater contribution boundaries, small worker populations can suffer a dent in profits due to the proration of administrative expenses. For these reasons, 401(k) retirement schemes are often disregarded by self-employed persons and small employers who prefer SIMPLE IRAs instead.
SIMPLE IRA vs. IRA
Compared to an IRA, a SIMPLE IRA plan allows for greater contributions. With a traditional or Roth IRA, investors are limited to a maximum contribution of $6,500 annually, or $7,500 for those aged 50 or older. While IRAs are restricted to individuals, small business owners and their employees may participate in SIMPLE IRA plans. Self-employed individuals occasionally establish SIMPLE IRA plans solely for themselves, akin to individual IRAs. Both plans are capable of lowering taxable income, thereby reducing tax liability.
What are the Benefits of a SIMPLE IRA?
Small business owners and employees looking for a faster retirement option can benefit from the various advantages offered by a SIMPLE IRA.
Lower Your Tax Bill
Meeting certain requirements allows for tax savings through contributions to a SIMPLE IRA plan, which can be used to invest in different assets, including stocks and mutual funds. A self-directed plan provides more options, enabling the purchase of alternative assets such as cryptocurrency and real estate, with the added benefit of reducing taxes.
Higher Maximum Contribution Limit Than Traditional IRAs
By contributing more to a retirement plan, you have the potential to save more on taxes. The IRS has set limits in place to prevent excessive tax deferral, but certain retirement accounts have higher caps compared to others. For IRA, the maximum amount you can contribute in 2023 is $6,500 ($7,500 if you are 50 years or older), whereas those who own a SIMPLE IRA can make almost double the amount of salary reduction contributions annually.
Retain Employees
By offering a SIMPLE IRA plan, small businesses can keep skilled workers on board. When job hunting, employees consider different aspects such as pay, benefits, and company values. If employees are left unhappy, they may quit, leading to recruitment and training expenses. By providing a strong retirement plan such as a SIMPLE IRA, employees feel valued, making it easier to retain them.
More Affordable than 401(k) Plans
Small companies may find 401(k) plans to be expensive due to their high administrative fees, making SIMPLE IRAs a more economically viable option. Although retirement accounts hold benefits, the combination of costly 401(k) plans and a limited staff may limit potential returns.
Fulfilling State Mandates
Small business owners in certain states are obligated to provide their employees with retirement plans if specific conditions are met, and this requirement is not limited to big corporations. The regulations vary according to state, but if you have only a few staff members who meet the prerequisites, it would be wise to consider obtaining a cost-effective retirement plan.
What are the best Bitcoin and cryptocurrency IRA platforms?
Currently, several platforms for cryptocurrency IRA exist and we suggest conducting your own investigation to determine the appropriate platform for your needs. Nevertheless, we will examine some of the prominent players in the market below.
BitIRA
BitIRA offers comprehensive insurance coverage for cryptocurrencies held on their platform, and they also provide a secure cold storage solution that utilizes multi-signature technology for clients who prefer to store their crypto on their personal device, protecting their private keys from theft and hacking.
You can also choose BitIRA to protect your cryptocurrency by storing it in cold storage. BitIRA makes use of grade-5 nuclear bunkers which are constantly monitored and protected by security professionals to ensure your digital assets are safe.
At present, BitIRA offers support for various digital currencies such as Bitcoin, Ethereum, Litecoin, Aave, and Chainlink.
BitIRA charges different fees, which entail an initial fee of $50 for account set-up and a yearly maintenance fee of $195.
To begin with BitIRA, a minimum investment of $5,000 is required at present.
Rocket Dollar
Rocket Dollar provides the option to establish a self-directed IRA or self-directed solo 401K, enabling individuals to invest in a range of assets, including cryptocurrency, within their retirement account. This could be beneficial for experienced investors looking for total autonomy over their retirement savings and the option to invest in other assets such as startups or real estate.
Rocket Dollar solves the issue of “Not your keys, not your crypto” by giving you the power to manage your storage choices. You can purchase hot or cold wallets, as well as physical storage devices, using your Rocket Dollar LLC checking account.
In terms of pricing, Rocket Dollar offers great value when compared to other options on this list. Their fee structure for a checkbook IRA is a one-time setup fee of $360 and a flat monthly fee of $15 with no additional asset under management fees. The platform you choose will be responsible for trading, custody, and other associated fees.
At this time, Rocket Dollar is able to facilitate transactions involving Bitcoin, Ethereum, and Litecoin.
It is important to note that Rocket Dollar is not designed for individuals who are new to cryptocurrency investing. As of now, the Rocket Dollar dashboard does not include a platform for trading in cryptocurrency.
Bitcoin IRA
Being one of the early adopters to offer a complete solution for trading and investing in cryptocurrencies such as Bitcoin through an IRA account, Bitcoin IRA boasts the most substantial user community in the market, which validates its user-friendliness.
Bitcoin IRA utilizes multiple solution providers to assist with your IRA, resulting in a consolidated experience for users. By integrating these providers, Bitcoin IRA ensures a safe platform for your IRA needs, including storage, insurance, and facilitation.
Investing in various cryptocurrencies is made possible through Bitcoin IRA, which includes Bitcoin, Ethereum, Ripple, Litecoin, Bitcoin Cash and Ethereum Classic among its options.
Moreover, the platform extends the opportunity for earning interest on assorted cryptocurrencies. Currently, Bitcoin IRA provides a 2% APY for Bitcoin and a 2.7% APY for Ethereum as of this writing. Nevertheless, to acquire the interest, you have to possess a value of $10,000 for each of the coins.
Investors should take notice of the elevated transaction and ongoing account fees associated with Bitcoin IRA in comparison to other options on this lineup. This account entails a 5.99% establishment fee and a 2% charge for trades.
SwanBitcoin IRA
At Swan Bitcoin IRA, you can have a self-directed traditional Bitcoin IRA or Roth IRAs. Your Bitcoin assets are secured in a custodial legal trust account at Prime Trust, a regulated U.S. chartered trust company that keeps your holdings compliant with regulations and protected. Additionally, an independent oversight is in place to prevent unauthorized use of funds and fraud.
Swan Bitcoin offers various options tailored to specific clients aside from the Traditional and Roth IRAs. Swan Private clients have access to Solo 401k, Checkbook IRA LLC, or IRA financial trust options, which offer flexibility and cater to different investment needs.
Swan Bitcoin levies a fixed monthly administrative charge of $20 until your account balance hits $100,000, at which point the monthly administrative charge is computed at 0.02083% of your balance at the end of each month (translating to an annualized charge of 0.25%). It is crucial to acknowledge that these administrative fees are subtracted on a monthly basis from beyond your IRA balance.
Swan applies a 0.99% fee for both purchasing and selling. It’s important to be aware that these fees are deducted from your IRA funds. Additionally, it is important to note that Swan Bitcoin solely deals with Bitcoin and does not provide support for any other cryptocurrency options for IRAs.
iTrust Capital
With iTrust Capital, you can trade cryptos and Bitcoins in your IRA platform at a very low cost. Moreover, their IRA/401K accounts also allow you to trade physical gold.
iTrust claims to charge significantly lower fees for IRA services compared to its competitors. While several cryptocurrency IRA companies have transaction fees as high as 15%, physical gold IRA companies charge a spread of 30%. In contrast, iTrust adopts a unique method and only charges a 1% transaction fee.
At present, an iTrust Capital account necessitates a minimum investment of $2,500 to commence.
iTrust Capital provides backing for a multitude of digital currencies such as Bitcoin, Ethereum, Cardano, Chainlink and Dogecoin.
Curv, a cryptocurrency wallet management solution utilizing multi-authorization, serves as a custodian for cryptocurrency assets and ensures financial institutions with incomparable security for their funds.
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