How to Set Up a SIMPLE IRA for Your Employees and Yourself
Learn how to set up a SIMPLE IRA for business owners to help employees and yourself save for retirement with low costs and easy setup.
Setting up a simple ira for business owners is one of the fastest ways to offer a retirement benefit without the cost and complexity of a traditional 401(k).
Here is what you need to know right away:
Running a business already takes everything you have. Retirement planning can feel like one more complicated task on a long list. But the right plan does not have to be complicated. A SIMPLE IRA gives you a clear, low-cost way to save for your own retirement and help your team do the same. For high-earning business owners especially, getting this structure right is an important piece of a larger tax and wealth strategy.
I'm Daniel Delaney, Founder of Seek & Find Financial, and I've spent my career helping business owners navigate decisions like this one, from my early years at Riverstone Financial Advisors through building my own independent advisory practice. I work with business owners every day on strategies that include simple ira for business owners planning as part of a broader, tax-efficient wealth-building approach.
Investing involves risk, including possible loss of principal. No investment strategy can ensure financial success or guarantee against losses. Past performance may not be used to predict future results. Provided content is for overview and informational purposes only, reflect the opinions of the author, and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice.
This information is being provided only as a general source of information. These views may change as market or other conditions change. This information is not intended and should not be used to provide financial advice and does not address or account for an individual's circumstances. Past performance does not guarantee future results and no forecast should be considered a guarantee. Please seek the guidance of a financial professional regarding your particular financial concerns.
Investment advisory services offered by duly registered individuals through Seek & Find Financial LLC a Registered Investment Adviser. Licensed Insurance Professional.
Simple ira for business owners terms to know:
Small business owners in places like Crown Point or Chicago often face a big problem. We want to help our team save for the future. But we do not want the high costs of a big 401(k) plan. A SIMPLE IRA is a great middle ground. It stands for Savings Incentive Match Plan for Employees.
This plan is built for small businesses. If you have 100 or fewer employees, this might be your best choice. To qualify, your employees must have earned at least $5,000 in the previous year. You also cannot have another retirement plan active at the same time. According to the Internal Revenue Service, it is a way for you to save for your own retirement while helping your staff do the same.
We often tell our clients that this plan is about balance. It is not as complex as a 401(k), but it offers more than a basic personal IRA. It is a tool that fits right into a IRA for Business Owners Complete Guide because it solves the "too much paperwork" problem.
The biggest reason to choose a simple ira for business owners is that it is easy. Most retirement plans require you to file a "Form 5500" with the government every year. This form is long and can be expensive to finish. With a SIMPLE IRA, you do not have to file that form. This saves you time and money.
Another benefit is called "immediate vesting." In some plans, employees have to work for many years before they own the money the boss puts in. In a SIMPLE IRA, the money belongs to the employee right away. This is a great way to show your team that you value them. It helps you keep good workers in a competitive market like Merrillville or Hobart.
We like this plan because it has low setup fees. Most banks and brokers will help you start one for very little cost. It is one of the most popular Retirement Savings Plans for Small Business Owners because it gets the job done without the headache.
For a long time, SIMPLE IRAs only came in one flavor: Traditional. This meant the money went in before taxes, and you paid taxes when you took it out later. But things have changed. Thanks to new laws like SECURE 2.0, we now have more choices.
Starting in 2026, you can offer a Roth SIMPLE IRA. This is a big deal for tax planning. With a Roth, employees pay taxes on the money now. Then, the money grows tax-free. When they retire, they can take the money out without paying any more taxes.
As a business owner, you can decide if your plan will allow Roth contributions. If you do, your employees can choose between the two. However, keep in mind that any money you put in as the boss is usually treated as pre-tax. This helps you get a tax deduction for your business today. You can learn more about these rules from the U.S. Department of Labor.
Now that it is May 2026, the rules for these plans are better than ever. The government has raised the limits on how much you can save. This is great news for your personal wealth and your Tax Strategy for Business Owners.
For 2026, the employee contribution limit is $17,000. If you or your employees are age 50 or older, you can put in an extra $4,000. This is called a "catch-up" contribution. If you are between the ages of 60 and 63, the catch-up is even higher at $5,250.
One thing you must remember is that the employer must put money in. You cannot have a SIMPLE IRA and contribute $0 as the boss. You have to pick one of two ways to give:
Choosing between the 3% match and the 2% flat contribution is a big decision. If you choose the 3% match, you only pay if your employees save. If they put in 0%, you put in 0%. This can be cheaper for your business.
If you choose the 2% flat contribution (also called "nonelective"), you pay for everyone. This is a very generous benefit. It ensures every worker is building a nest egg.
There is also a new rule from SECURE 2.0. Some small businesses can now make extra contributions. You might be able to put in up to 10% of an employee's pay, capped at $5,000. This gives you more flexibility to reward your team when the business is doing well. It is a powerful way to manage your Tax Strategy for Business Owners while building employee loyalty.
Setting up a simple ira for business owners is a straightforward process. You do not need a team of lawyers. You just need to follow a few simple steps.
First, you need to pick a financial institution. This could be a bank or a broker. We use technology-driven tools like Altruist to make this even easier for our clients. Once you pick a place, you need to fill out a form. The IRS has two main forms for this:
You must have the plan set up by October 1 if you want it to count for the current year. If you start a brand new business after October 1, you can set it up as soon as possible. Once the forms are signed, you keep them in your files. You do not even have to mail them to the IRS! This is part of why it is so central to a Business Owner Financial Planning Guide.
Even though the plan is simple, there are still rules to follow. Every year, you must give your employees a "summary description." This tells them how the plan works. You also have to give them a "60-day election period."
This period usually happens from November 2 to December 31. During this time, employees decide how much money they want to take out of their paycheck for the next year. You must tell them by November 2 whether you will do the 3% match or the 2% flat contribution for the coming year.
You also have to be careful with the money. When you take money out of an employee's check, you must deposit it quickly. Usually, this means within 30 days after the end of the month. If you make a mistake, you can use the IRS Fix-it Guide to help correct it.
A simple ira for business owners is great, but it is not the only option. We work with many owners in Valparaiso and Chicago who earn over $400,000 a year. For them, a SIMPLE IRA might not let them save enough money.
If you want to save more than $17,000 (plus catch-ups), you might look at a 401(k) or a SEP IRA. A 401(k) has much higher limits, but it costs more to run. A SEP IRA is very easy, but it does not allow employees to put in their own money.
Here is a quick look at how they compare:
Max employee deferral
Employer match
Admin complexity
Form 5500 required?
Vesting
For those looking for Retirement Plans for High Earners, the choice depends on your goals. If you have no employees, a Solo 401(k) might be better. If you have a large team and want to save $60,000 or more, a traditional 401(k) is the way to go. But if you want something easy and effective for a small team, the SIMPLE IRA wins.
The government wants you to keep this money for retirement. If you take it out before you are age 59.5, you will likely pay a 10% penalty plus income tax.
However, there is a special rule for the simple ira for business owners. If you take money out within the first two years of joining the plan, the penalty jumps to 25%. This is a very high cost, so it is important to leave the money alone while it grows.
Generally, the answer is no. This is called the "exclusive plan rule." If you have a SIMPLE IRA, you cannot have another retirement plan for that same year.
There are a few small exceptions for things like union plans, but for most small business owners in Portage or Hebron, you have to pick just one plan per calendar year.
If your business grows and you want to move to a 401(k), you have to close the SIMPLE IRA correctly. You cannot stop it in the middle of the year.
You must notify your employees by November 2 that the plan will end on December 31. You also need to tell your bank or broker. Once the year is over, you can start your new plan on January 1.
A simple ira for business owners is a powerful tool. It offers a low-cost way to build wealth and keep good employees. While it has lower limits than some plans, its ease of use is hard to beat for a busy entrepreneur.
For owners earning over $400K, it is vital to look at how this fits into a total tax strategy. We believe in using technology and clear frameworks to help you grow. Whether you are in Valparaiso, Indiana, or downtown Chicago, your retirement plan should work as hard as you do.
At Seek & Find Financial, we help you look at the big picture. We don't just give generic advice. We help you build a system for long-term success. If you are ready to take the next step in your financial journey, we are here to help.
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Investing involves risk, including possible loss of principal. No investment strategy can ensure financial success or guarantee against losses. Past performance may not be used to predict future results. Provided content is for overview and informational purposes only, reflect the opinions of the author, and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice.
This information is being provided only as a general source of information. These views may change as market or other conditions change. This information is not intended and should not be used to provide financial advice and does not address or account for an individual’s circumstances. Past performance does not guarantee future results and no forecast should be considered a guarantee. Please seek the guidance of a financial professional regarding your particular financial concerns.
Investment advisory services offered by duly registered individuals through Seek & find Financial LLC a Registered Investment Adviser. Licensed Insurance Professional.
