• Is a SIMPLE IRA Right for Your Business?

    A look at this easy-to-administer retirement program.

      

    Provided by MidAmerica Financial Resources

     

     

    Do you want a simple retirement plan? A plan you can implement easily as an independent contractor or small business owner, without a lot of paperwork? A SIMPLE IRA may be the answer.

     

    A SIMPLE IRA plan gives you a tax break, while giving you and your employees a way to build retirement savings. True to its name, it requires no annual filing of Form 5500 with the IRS, which is typical for many other types of small business retirement plans. SIMPLE IRA plans are often set up using IRS Forms 5304-SIMPLE or 5305-SIMPLE.1

     

    If you work solo, a SIMPLE plan could really help your retirement saving effort. Frustrated at the annual ceiling on Roth or traditional IRA contributions that lets you save only a few thousand dollars a year? Well, you can direct up to $12,500 per year into a SIMPLE IRA, $15,500 if you are 50 or older.1

     

    SIMPLE IRA contributions are made with pre-tax dollars, so they are 100% deductible. Just like other IRAs, a SIMPLE IRA allows tax-deferred growth of invested assets.2

     

    How does a SIMPLE IRA plan work when you have employees? Each one of your employees gets their own IRA as part of the plan, with the same high annual contribution limits noted above. As an employer, you must contribute to their IRAs each year in one of two ways (and you must inform them which approach you will take for the coming calendar year):

     

    *You can elect to match their contributions, dollar-for-dollar, to a limit of 3% of their annual salaries. (If you like, you can set this limit as low as 1%, but you can only lower the limit from the standard 3% in two years out of any five-year period.) 1,2  

     

    *Or, you can just make a non-elective contribution of 2% of each employee’s salary to each employee’s plan. If you choose this option, you must make these 2% contributions whether or not the employee makes any plan contributions.1,2

     

    Employee contributions to a SIMPLE IRA are always 100% vested, and employees are free to make their own investment decisions. As the accounts are IRAs, the money saved and invested may be held in a variety of investment vehicles offered by particular plan vendors.1

     

    What does an employee have to do to be eligible for the plan? Each employee must meet two simple compensation tests. One, will that employee receive at least $5,000 in compensation from your business this year? Two, did he or she receive $5,000 or more in compensation from your business during any of the two prior years? If both those tests are met, that employee can participate in a SIMPLE IRA plan.1

     

    Do SIMPLE IRAs have any shortcomings? Yes, they do; no small business retirement plan is perfect. An employer must always make contributions to a SIMPLE IRA, year-in and year-out. Plan participant loans are also prohibited from SIMPLE IRAs, which is not the case with many other retirement plan accounts. That said, there is much more to like about SIMPLE IRAs than there is to dislike.2

         

    Why not make things SIMPLE? Look into a SIMPLE IRA plan for your business, your employees, and yourself. Sole proprietorships, partnerships, and corporations all have them – for great reasons. 

         

    MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@natplan.com. www.mid-america.us

      

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

      

    Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser.
    MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to NPC.

     

     

        

    Citations.

    1 - irs.gov/retirement-plans/plan-participant-employee/who-can-participate-in-a-simple-ira-plan [3/15/16]

    2 - irs.gov/retirement-plans/choosing-a-retirement-plan-simple-ira-plan [7/28/16]

     

  • Can You Get More Income by Reapplying for Social Security?

    Most of the loopholes that let retirees do this are gone, but two possibilities remain.

      

    Provided by MidAmerica Financial Resources

     

     

    Years ago, retirees exploited loopholes in Social Security’s framework to dramatically increase their lifetime Social Security benefits. Many of the tactics they used are no longer permitted, but there are still a couple of ways to restart those retirement benefits in pursuit of higher monthly income.

     

    Once, retirees could hit “reset” on their benefits, years after first receiving them. They could repay the federal government an amount equal to the benefits they had already received, and then reapply for benefits at their current, older age. Basically, they were boosting their monthly incomes after repaying an interest-free loan from Uncle Sam. The Social Security Administration closed this loophole in late 2010. Too many retirees were taking advantage of it, and the SSA’s tolerance had worn thin. Only a limited form of this loophole is still around (see below).1

     

    Until 2016, many married couples could employ two other, savvy strategies. Through the “file and suspend” and “file and restrict” methods, they could try to arrange greater lifetime Social Security income. Under the “file and suspend” method, a higher-earning spouse could apply for benefits, suspend them, and let the lower-earning spouse file for spousal benefits only. This let retiree households receive some spousal benefits, while both spouses waited to receive (what would, eventually, be) larger, individual benefits.2

     

    “File and restrict” (also called “deemed filing”) was a variation on this: a retiree could claim only spousal benefits, while his or her own benefits grew larger with time. The “deemed filing” loophole is rapidly closing. Individuals (who were age 62 on or after January 2, 2016) can no longer get one kind of retirement benefit from Social Security while accumulating credits for delaying another.2,3

     

    Today, individuals can still “file and suspend” their benefits – but now, this choice suspends spousal benefits as well. (This does not apply to Social Security recipients who voluntarily suspended their individual benefits before April 30, 2016.)2,3

     

    There are still two ways to possibly realize larger monthly benefits. An individual who has received Social Security benefits for 12 months or less may be eligible to withdraw his or her application and apply for benefits again at a later date. Social Security lets a person do this only once. Form SSA-521 is the document to use. The reason for withdrawing the application must be clearly stated, and others who get benefits based on the individual’s work history must also give their consent to the decision. The person who withdraws their application must pay back any retirement benefits already received.4

     

    At Full Retirement Age (FRA), which is 66 or 67 in the case of baby boomers, a Social Security recipient can choose to suspend his or her monthly retirement benefit until as late as age 70. (Benefits will automatically restart at that age.) No payback of benefits already received is necessary; the benefits are just suspended until the individual decides to restart them, or turns 70, whichever comes first. The decision, however, has a couple of downsides, however. Any linked, spousal retirement benefits will also be suspended, and the individual will have to pay his or her own Medicare Part B premiums during this time.4

       

    Knowing when to apply for Social Security is crucial. This may be one of the most important financial decisions you make for retirement, and it cannot be made casually. Be sure to consult the financial professional you know and trust before you apply for retirement benefits.

         

    MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@natplan.com. www.mid-america.us

      

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

      

    Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser.
    MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to NPC.

     

    Citations.

    1 - time.com/money/3592414/social-security-rule-change-benefit-withdrawals/ [12/2/14]

    2 - thestreet.com/story/13426147/1/social-security-loopholes-are-closing-here-are-new-strategies-for-maximizing-benefits.html [1/17/16]

    3 - ssa.gov/planners/retire/claiming.html [10/12/16]

    4 - fool.com/retirement/2016/06/13/how-do-i-withdraw-my-social-security-application.aspx [6/13/16]