What is a SIMPLE IRA?

What is a SIMPLE IRA?

• A. A retirement plan for corporations
• B. A retirement plan that allows contributions from employees and employers, primarily for small businesses
• C. A government-sponsored retirement account
• D. A type of pension fund

Answer: (B)

A SIMPLE IRA, which stands for Savings Incentive Match Plan for Employees Individual Retirement Account, is specifically designed to benefit small businesses and their employees. This retirement plan allows contributions from both employees and employers, making it an attractive option for small business owners looking to set up a retirement savings plan for their employees without the administrative complexities of other plans. The key features of a SIMPLE IRA include the ability for employees to make salary-deferral contributions, and for employers to match those contributions up to a certain limit, providing an incentive for employees to save for retirement. This dual contribution structure promotes collective savings, enhances employee engagement in retirement planning, and ultimately helps both the employer and employees achieve their retirement savings goals more effectively. In contrast, the other options refer to different types of retirement or investment plans that do not align with the characteristics of a SIMPLE IRA, such as being specifically for large corporations, governed by the government, or being classified as a pension fund.

A SIMPLE IRA, which stands for Savings Incentive Match Plan for Employees Individual Retirement Account, is specifically designed to benefit small businesses and their employees. This retirement plan allows contributions from both employees and employers, making it an attractive option for small business owners looking to set up a retirement savings plan for their employees without the administrative complexities of other plans.

The key features of a SIMPLE IRA include the ability for employees to make salary-deferral contributions, and for employers to match those contributions up to a certain limit, providing an incentive for employees to save for retirement. This dual contribution structure promotes collective savings, enhances employee engagement in retirement planning, and ultimately helps both the employer and employees achieve their retirement savings goals more effectively.

In contrast, the other options refer to different types of retirement or investment plans that do not align with the characteristics of a SIMPLE IRA, such as being specifically for large corporations, governed by the government, or being classified as a pension fund.