401(k) or Simple IRA
we have a potential client that is starting a retirement plan for 5 employees/participants. they do not have a plan in existance yet . they are looking for a low cost plan. they are entertaining simple IRA versus 401(k) for small business. which one do you think is cheaper and better tax credit and less restrictions if they decide to move the plan to another type of plan in a year or two?
Please help.
Permalink Submitted by Alan Spross on Mon, 2010-08-23 23:14
It is simpler and easier to start with a SIMPLE IRA, although contributions are limited in comparison to a 401k. The SIMPLE must be the ONLY plan in force, but can be replaced with a 401k at a later date after the business is on solid ground. Note the 2 year transfer limitations on SIMPLE IRAs.