1. What is a Simple IRA?

A Simple IRA (Savings Incentive Match Plan for Employees) is a tax-deferred retirement savings plan for small businesses and self-employed individuals. It allows both employer and employee contributions with tax advantages.

2. How Does the Calculator Work?

The calculator uses the Simple IRA future value formula:

Where:

• \( Contribution \) — Annual contribution amount (USD)
• \( r \) — Annual interest rate (decimal)
• \( n \) — Number of years

Explanation: The equation accounts for compound growth of regular contributions with tax-deferred earnings.

3. Importance of Retirement Planning

Details: Proper retirement planning helps ensure financial security in later years. Simple IRAs offer tax advantages and employer matching opportunities for small business employees.

4. Using the Calculator

Tips: Enter annual contribution in USD, interest rate as decimal (e.g., 0.07 for 7%), and number of years. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between Simple IRA and traditional IRA?
A: Simple IRAs are specifically for small businesses with employer matching, while traditional IRAs are individual accounts with different contribution limits.

Q2: What are the contribution limits for Simple IRA?
A: For 2023, employees can contribute up to $15,500 ($19,000 if 50 or older), plus employer contributions.

Q3: When can I withdraw from a Simple IRA?
A: Withdrawals before age 59½ may incur a 10% penalty, except for certain exceptions like first-time home purchase.

Q4: How does employer matching work?
A: Employers must either match employee contributions dollar-for-dollar up to 3% of compensation or contribute 2% of compensation for all eligible employees.

Q5: Are Simple IRA contributions tax-deductible?
A: Yes, contributions are made pre-tax, reducing your taxable income for the year.