Small Business 401k vs Simple IRA
Determining if a Small Business 401k vs Simple IRA is a huge decision to make both for yourself and for your employees. To clarify, this post is not discussing Individual 401k Plans rather we will be discussing the differences between a Business 401k vs a Simple IRA.
Business 401k Plan Features
Typically best for companies that have more than 100 employees.
Allows for a higher level of contribution to the plan for employees who are high earners.
Optional matching program. For an example, rather than having to match 3% an employer could create a matching program that matches up to 5%.
Greater plan customization to meet the needs of your business.
Typically participants inside of the plan have limited investment options.
Simple IRA Plan Features
Typically best for companies that have up to 100 employees.
Does not allow for as high of a contribution as a Business 401k would allow. However, you can still contribute more to a Simple IRA than you would a Traditional IRA.
A Simple IRA plan, currently, must match 3%. You do not have the matching customization as you would with a Business 401k.
Participants in the plan typically have a much wider range of investments to choose from.
Small Business 401k vs Simple IRA Fees
The fees associated with a business 401k and a Simple IRA are usually pretty similar. Fees are based on how many assets are inside of the Business 401k or Simple IRA plan. The more money inside of the plan, the less your fee percentage should be. It’s important to have your plan reviewed every few years to make sure your fee is competitive and you are not being over charged.
If you are interested in a free comprehensive review of your current Business retirement plan you can contact us here.
Can Small Businesses Offer a 401k
If we are specifically talking about a business 401k and not a Simple IRA, then yes it is theoretically possible to set up a business 401k for a small business. However, usually the costs associated with doing this may not be appropriate based on your size. We strongly recommend reaching out to a financial professional to help determine which plan is best for you.
Disclosure
IntelliVest Wealth Management is a Registered Investment Advisor Headquartered in Spartanburg South Carolina. This is not a solicitation or financial advice. This article should only be used for educational purposes. Please consult with IntelliVest Wealth Management about your personal financial situation.
