Simple IRA plans have much in common with 401k plans, except their administration is easier and costs less. This investment system was created with the intention to address the increasing need for people to make their own retirement provisions, due to expected pension shortages in the future. People can prepare for their retirement by making contributions from their own income, matched with contributions from the employer under the one plan.

A simple IRA plan, which allows for matching employee and employer contributions to the investment, has benefits for both parties. The employee can save and gather money for their retirement, and on the other hand, the employer can attract workers by offering this incentive. The plan’s only drawbacks are that there are more rules on how the account is funded and whether borrowing is allowed. However, these restrictions are probably not going to be of consequence for many workers as the plan will enable you to achieve a comfortable retirement regardless.

Negotiating this plan with your employer or taking advantage of one that is being already offered will be very helpful. With a Simple IRA plan, you can accumulate capital for your retirement over several years, and to do that, you won’t have to spend a lot of your income. This is essential since you have other priorities you need to take care of first, such as your mortgage and home. Contributions from your employer will certainly ease the financial burden for you.

Even though the simple IRA plan has a number of restrictions, you’re free to invest the money how you want, just as you would be with a traditional IRA. You can invest in mutual bonds, stocks, bonds, and real estate. People with simple IRA plans invest the majority of their money in mutual funds, because they provide some protection when adverse price changes occur. If you want, you can opt for a general mutual fund, in which the choice of stocks are solely driven by the manager’s expectations of price movements. Another option is a specialist fund.

As with a traditional IRA plan, the simple IRA plan has the same restrictions for when you can withdraw money from the plan. Ideally, the best thing to do with your IRA plan is to leave the money in the fund until retirement. Withdrawals will use up your capital and you’ll lose out on any potential profits you made for investing that money. Not only that, early withdrawals are subject to penalties. Penalties can only be removed in rare instances, like when you urgently need money to pay medical bills or education fees for a close family member.

When you have a simple IRA, you’re still allowed to have another type of IRA plan, and a separate 401k plan is even possible. When organizing your overall retirement plan, make sure it suits your personal income and needs. No doubt, the most valuable investment in your life is going to be your home, but there are also many other options you need to consider for investing your income. If you have the income capacity, you can plan for a comfortable retirement with a simple IRA, and also take part in additional investment beyond an IRA.