Ways & How

How to Maximize My Simple IRA

How to Maximize My Simple IRA

Simple IRA is actually an acronym that stands for Savings Incentive Match Plan for Employees Individual Retirement Account. It was created in order to make it easier for both employees and employers to maintain a retirement plan, since the cost of establishing and maintaining it is very low compared to other IRAs. It best suits small employers who are not capable of sponsoring retirement benefits. Since you are also paying for your Simple IRA, it is natural to want to maximize the benefits of your retirement account. You can easily find out the answer to the question of how to maximize my Simple IRA.

  1. Start contributing early. Even if you are still a student, you can start contributing to your IRA up to the limit. Every contribution incurs a tax deduction so that your money can grow tax-deferred until the time comes to withdraw upon retirement. Your employer matches your contributions dollar-per-dollar up to a certain point or with a regular 2 percent deposit. Remember that you can make payments until your tax return deadline for that year.

    The earlier you start with a retirement fund, the more time your money has to compound.

  2. Start with a lump sum. If you happen to have a lot of money on hand that you can invest, you can consider this as your base retirement fund. For instance, if you received cash as a graduation or birthday gift, you can invest this money in your retirement fund instead of spending it.

  3. Avoid taking loans. There may be times when you want to withdraw some of your funds for emergency purposes, such as paying for hospital bills and buying a new home. While these are acceptable reasons, it is best to avoid withdrawing any funds from your Simple IRA until retirement to ensure you have enough money to last through your retirement. Instead, establish an emergency fund for unforeseen situations. Moreover, the Internal Revenue Service does not allow loans from a Simple IRA without taxes and penalties.

  4. Educate yourself. Knowing about the different types of investments can help you make the right decisions for your Simple IRA. You can also convert it into other types of IRA that allow you to have more flexible investment options. For instance, if you understand real estate investment, you can do that and expect better returns in the future. Taking educated risks can help you grow your money until retirement.

  5. Get financial help. It is certainly advisable to seek help from an experienced financial advisor regarding your investment decisions. They can also help you achieve your financial goals and can even address any questions that you may have on how to achieve those goals. Your own knowledge about investing in a retirement fund, plus insight from a competent consultant, can help you employ strategies to maximize your retirement income.

The Simple IRA may be a basic plan for small businesses and their employees, but you do not have to limit yourself to its basic options. Learn how to maximize my simple IRA by educating yourself on other investment options. Stretch your limits so that you can get more out of your Simple IRA in the long run.


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