SIMPLE IRAs and Their Limitations

In terms of a SIMPLE IRA, the ‘SIMPLE’ stands for ‘Savings Incentive Match Plan for Employees’.

This type of IRA is a combination of a regular IRA and a retirement plan that is offered by employers.

Here I will explain what a SIMPLE IRA is, how it is different from a regular IRA and how it is similar to other IRAs.

I will also provide information about precious metal investments and explain how you can protect your retirement assets when it comes to economic disasters such as stock market and currency collapses.

What is a SIMPLE IRA?

• A SIMPLE IRA is a tax deferred method that allows you to save for retirement. It is not an uncommon method of saving for retirement that is offered by employers.

• This type of retirement plan was created for companies that have fewer than 100 employees. Also, it is supposed to be much easier to setup than many other retirement packages. This is because a SIMPLE IRA does not have to adhere to the rules of the ERISA, which means that it doesn’t cost a lot of money or paperwork to setup.

• If a company offers SIMPLE IRA plans, it has to contribute a minimum amount to its employees’ accounts. Either a match program for a minimum of 3 percent of employee dollars is setup, or the company has to contribute a flat rate of 2% of every employee’s income.

• Similar to what happens when an employee opens an SEP IRA, an employee is basically setting up a regular IRA with his employer when opting for a SIMPLE IRA; however, the employee could set up a 401k plan via a SIMPLE IRA as well.

• One of the main differences between a 401k and a SIMPLE IRA is that the contribution limits for a SIMPLE IRA are not as high. A SIMPLE IRA has limits as low as $15,500 (as of 2023), which is lower than the average 401k or other types of retirement plans that employers offer.

• In addition, setting up a SIMPLE IRA is more complicated, and it has a longer waiting period. The waiting period can be as long as two years.

• IRS Publication 560 controls SIMPLE IRAs.

Rollover Rules and SIMPLE IRA Limitations

You can only transfer money in your SIMPLE IRA to another SIMPLE IRA during the first two years. This is considered to be a trustee to trustee transfer that is tax free, but if you make other types of transfers it might mean paying a 25% penalty in taxes. Keep in mind that this is usually just 10% for a regular tax-deferred plan. But, once the two year wait is over, it is possible to transfer to another type of IRA account. However it cannot be from a Roth to non-Roth account or the other way around.

There are other SIMPLE IRA limitations as well. If you choose to rollover an amount, I recommend that you do not choose an indirect one over a direct one. Indirect rollovers have requirements for withholdings that could incur distribution penalties.

How Can Gold Protect Your Retirement?

Gold Investments and a SIMPLE IRA

Yes, there are SIMPLE IRA limitations when it comes to the things that you can invest in. But they normally offer the following kinds of investments such as corporate or government bonds, individual stocks, mutual fund shares, real estate, CDs, ETF shares and precious metal bullion.

You can use a SIMPLE IRA to invest in paper gold by purchasing the stock of various gold mining companies, EFTs that have mining companies or mutual funds that include mining company stock. This is the way to invest in gold indirectly.

A Paper Gold Investment vs. a Physical Gold Investment

Paper gold is the name that is given to the stocks of companies that look for, produce or mine gold. There are plenty of gold stocks available for selection. Some of these bigger companies are listed on gold indices such as GDX or HUI.

Owning physical gold is not as risky as owning gold stocks. This is mainly because when the spot price of gold goes up, gold stocks will appreciate very fast. If the spot price decreases, gold stocks will fall very quickly.

Gold stocks are also unstable because of other risks such as cost of production risks, management risks, regulatory risks and Fiat currency risks. However, the price of physical gold has never dropped down to zero. As you can see, physical gold has been proven to have much more lasting value than paper gold.

Why is it Advantageous to Invest a % of Your Retirement Portfolio in Gold?

Investing in gold is a safe and easy way to broaden your retirement portfolio. It is one of the best ways to provide protection for your assets against unstable economic conditions. Gold has historically always risen in value.

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If you wish to include precious metals in your IRA a Self Directed IRA gives you more options than a SIMPLE IRA does. Setting up a Self Directed IRA is one of the simplest, easiest and overall smartest ways to have a broad retirement portfolio and get the best tax benefits when investing in precious metals.

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About the Author: Doug Young

Doug is a highly experienced professional and widely trusted authority in financial investing, commodity trading, and precious metals. With over 20 years of expertise, he helps others make informed decisions by sharing a combination of personal experience, extensive knowledge and meticulously researched information on gold IRAs, precious metals investing and retirement planning. He regularly writes news items on these topics. He has considerable experience of evaluating Gold IRA and Precious Metals Companies, gained over a period spanning more than a decade.

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