What is a SIMPLE IRA?

Okay, you work alone now, but aspire to bigger things. Then a Savings Incentive Match Plan for Employees (SIMPLE) IRA may be better for you.

With a SIMPLE IRA, you can keep investing in the same plan after you hire someone. Though don't forget what the plan name stands for: you have to match your employees' contributions, up to 3% of pay.

The main problem with a SIMPLE IRA is that you can stash away no more than $12,500 a year ($15,500 if you're 50 or over), which may not be enough to meet your retirement goals. Also, if you need to make a withdrawal from a SIMPLE IRA plan within two years of its inception, the 25% penalty is significantly higher than the 10% fee you'd be charged for early withdrawal from a SEP IRA.

Both the SEP IRA and individual 401(k) make it tough on sole proprietors who try to hire even one full-time employee. SEP rules can lock you into expensive contributions. With an individual 401(k), unless that employee is married to you, you'll have to stop funding your plan or convert it to the more complex and cumbersome employer version. For that, you'll surely need professional help, and you may even have to hire a third-party plan administrator. That doesn't come cheap.