SIMPLE IRA vs. 401(k): Retirement Planning for Mid Michigan Small Businesses
As a small business owner in the Mid Michigan Thumb Region, offering retirement plans can attract top talent and secure your employees’ futures. At Raymond & King CPAs, we specialize in backroom accounting for businesses grossing under $10 million, helping you choose between SIMPLE IRA and 401(k) plans. Here’s a breakdown of their differences for 2025.
SIMPLE IRA: Easy and Affordable
The Savings Incentive Match Plan for Employees (SIMPLE IRA) is ideal for small businesses with fewer than 100 employees. It’s low-cost and easy to set up, with minimal administrative burden. Employees can contribute up to $16,000 in 2025 (plus $3,500 catch-up for those 50+). Employers must match contributions up to 3% of employee salaries or contribute 2% for all eligible employees, regardless of participation. SIMPLE IRAs suit businesses seeking simplicity and lower costs but offer less flexibility than 401(k)s.
401(k): Flexible and Robust
A 401(k) plan offers higher contribution limits—$23,000 for employees in 2025 (plus $7,500 catch-up for those 50+)—and greater flexibility. Employers can match contributions, offer profit-sharing, or customize vesting schedules. However, 401(k)s involve higher setup and administrative costs, including annual reporting, making them better for businesses with growth ambitions or larger budgets. Safe Harbor 401(k)s can simplify compliance but require mandatory employer contributions.
Key Differences
Contribution Limits: 401(k)s allow higher contributions ($23,000 vs. $16,000), benefiting high earners.
Costs: SIMPLE IRAs have lower setup and maintenance fees, ideal for small Mid Michigan businesses.
Flexibility: 401(k)s offer more plan design options, like loans or Roth contributions, but require more oversight.
Employer Contributions: SIMPLE IRAs mandate matching or fixed contributions; 401(k)s offer optional matching.
Why Choose Raymond & King CPAs?
Located in the Mid Michigan Thumb Region, we streamline retirement plan setup with our backroom accounting services. We’ll help you choose between a SIMPLE IRA or 401(k) based on your business’s needs and budget.
Ready to offer retirement plans? Contact Raymond & King CPAs today for expert guidance tailored to Mid Michigan small businesses.
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