Will users of these retirement plans get the same bump in contributions that 401(k) plans enjoyed?

2019 Simple IRA Limits

Will users of these retirement plans get the same bump in contributions that 401(k) plans enjoyed?

Many small employers use SIMPLE IRAs to give their employees a way to set money aside for retirement. Each year, the contribution limits for SIMPLE IRAs can change with inflation, and the millions of workers who have access to more complex 401(k) plans found out recently that they'll get a $500 increase in the maximum amount they're allowed to set aside.

In past years, SIMPLE IRA participants didn't always see the same boosts to maximum contributions that 401(k) participants got. However, 2019 will be a good year for SIMPLE IRA users, as they'll also see a $500 increase in how much they're allowed to put in their accounts.

What SIMPLE IRAs are and what you need to know about their limits

Lawmakers love acronyms, and the name of the SIMPLE IRA comes from the first initials of its longer name. Savings incentive match plans for employees are simpler versions of an employer-sponsored retirement plan that lets both employees and employers set money aside for retirement savings, and you'll often see small businesses and self-employed workers use SIMPLE IRAs instead of setting up more complicated 401(k) plans that require a lot more paperwork and constant vigilance.

SIMPLE IRA participants are allowed to make annual contributions up to certain maximums, and in 2019, that number will rise to $13,000 for those younger than 50. A catch-up contribution of $3,000 is available to those 50 or older, making the total $16,000. Those numbers are $500 higher than they were in 2018.

In order to run a SIMPLE IRA plan, employers must also contribute toward their workers' retirement in one of two ways. Employers have the choice of matching employee contributions dollar for dollar up to a maximum of 3% of salary, with no limit to the permitted match. Alternatively, even if an employee doesn't make any contributions at all, the employer can contribute 2% of the worker's salary. There, a maximum of $5,600 applies. That's up $100 from year-ago levels, but because of the 2% rule, it only affects high-income workers making more than $275,000.

The pros and cons of a SIMPLE IRA

The most obvious reason SIMPLE IRAs aren't ideal for savers is that their contribution limits are lower than 401(k) plans. Having a maximum that's $6,000 to $9,000 lower can be problematic for those who have a lot of money to save, although for many workers, even the smaller SIMPLE IRA limits are more than enough to take care of their needs.

However, SIMPLE IRAs have some real benefits. Small businesses often have trouble setting up retirement plans at all, and that can leave employees feeling frustrated. The easy-to-create SIMPLE IRA structure takes a lot of the burden off employers, and from the worker's standpoint, having a SIMPLE IRA is in many ways similar to having your own personal IRA. There's some extra paperwork you'll have to deal with when you first start up a SIMPLE IRA, but after that, it's pretty easy to administer the plan and ensure that contributed money gets to where it belongs.

If you work for yourself, then a SIMPLE IRA can let you save a lot toward retirement, because you get to combine employee and employer contributions. For instance, those who use the 3% matching rule and make enough money to fully match employee contributions can put up to $26,000 if they're under 50 or $32,000 if they're 50 or older into a SIMPLE IRA. The only hitch is that if you later bring on outside employees, you'll have to treat them the same -- but that works as a good incentive for job applicants looking to come on board as well.

Keep things SIMPLE

2019 will bring some long-awaited boosts to SIMPLE IRA savers, and those who like to max out their retirement savings will appreciate the opportunity to set aside a little more money. Whether you're a business owner looking to offer a simple yet effective retirement plan or a worker whose employer already offers access, SIMPLE IRAs are useful tools that can bring big tax savings.

At Nugent & Associates, we're not just number crunchers. We bring over 3 decades of invaluable certified public accounting and tax expertise to your company – serving as business and financial strategists who can offer such services as tax and financial planning, investment advice, diligent financial records, and help with estate planning.

Even better, we will give you time to focus on what you do best: running the day-to-day operations that drive your business toward success.

Take advantage of our FREE and no obligation business checkup.

We will visit you at your business at a time and day convenient for you, analyze your numbers, discuss your goals and concerns and report back with a complimentary detailed written analysis to help your business succeed!

At Nugent & Associates, we're not just number crunchers. Our people bring decades of invaluable certified public accounting and financial and tax expertise to you – offering tax and financial strategies to individuals such as yourself. If you have any questions or concerns about your own tax, financial or investment matters, please do not hesitate to contact us.

Experienced tax and financial experts are not just for the super rich. At a reasonable fee you too can maximize your wealth and receive professional guidance for retirement, and/or any tax issues you may be facing, no matter your situation, with a tax and financial expert as your consultant.

Contact Nugent & Associates today. We don't charge for phone calls. You may just find you found an ally in your quest to have a great financial future.

After all, at Nugent & Associates, we succeed when you succeed!



This page is intended to be informational. This website, nor any of the information contained on this site constitutes professional, business, tax or legal advice and is not a substitute for such advice nor does it create a professional-client relationship between you and Nugent & Associates.

State and federal laws change frequently, and the information in this page may not reflect your own state’s laws or the most recent changes to the law.

The information contained within this website should not be considered as a solicitation or an offer for a professional-client relationship. Materials contained in this website are of a general nature and should not be substituted for professional advice. Nugent & Associates is providing this website and the information contained herein only as a convenience to you. Nugent & Associates assumes no liability or responsibility for any errors or omissions contained within this website. There is no guarantee that the information included on this site is current, accurate, complete, useful, or reliable.

Tax Planning & Preparation

We assist our clients in individual and business tax planning throughout the year.

Nugent & Associates provides:
  • Year-Round analysis to ensure a smooth and predictable year-end close.
  • Assist in establishing retirement planning.
  • Performs in-depth review of all deductions available.

Financial Statements

Nugent & Associates offers outstanding accounting services and acts as a quasi-controller for companies who do not employ their own full-time accountants.

This allows our clients with more time to focus on new services, new customers and other core business issues.

Business Planning, Budgeting
& Growth Strategies

Nugent & Associates assists it clients with:
  • Starting a new venture, product or service
  • Expanding a current organization, product or service
  • Buying a new business, product or service
  • Turning around a declining business

QuickBooks Training
& Support Services

As Certified QuickBooks Professional Advisors, we can be of assistance with QuickBooks accounting or payroll and help increase your productivity and efficiency.