PEP vs state mandated IRAs: it’s the money

When an employer must sign up with a state-mandated IRA program and is considering that or a pooled employer plan, I think the selling point is retirement savings.

The annual contributions limit for these state programs is $6000 or $7000 (for 50 or over) in 2022. For a 401(k) plan participant under the age of 50, they can contribute $20,500 to a 401(k) plan in 2022, and that increases to $27,000 if the participant is 50 or older in 2022. If the employer contributes, the maximum 2022 contribution limit applicable to combined employee and employer contributions is $60,000 and increases to $67,500 if the employee is 50 or older.

Without even getting to the issues of a government-run retirement program huge participant retirement savings can be had in a 401(k) pooled employer plan, rather than a SIMPLE IRA offered by the state.

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