“David, I read your blog post about state-mandated IRA programs, and how it makes sense to set-up your own retirement plan and not use the government’s.”

“Thanks Jeff. I’m always happy to hear from someone who’s doing their homework and trying to stay on top of what’s happening. How can I help?”

“Well,” said Jeff, “I just read that starting in 2024, the government will launch what they call ‘starter 401k’ and ‘starter 403b’ plans. I don’t think they’d made that announcement when you wrote your article so I wanted to find out…”

“New plans; same news,” I said. “The starter 401k and 403b plans are just deferral plans that require an automatic deferral limit of between 3% and 15%. The maximum elective deferral is $6K; the maximum catch-up is $1K—and that’s only allowed if you have fewer than ten employees.”

“So maybe a better fit for really small businesses?” asked Jeff.

“It’s good that the government tried to make a simple version of the 401k plan,” I replied, “but imitations usually fall short; this one certainly did. The same old question applies: Why pigeonhole yourself into a government plan when you can open up a much more flexible 401k plan on your own that allows for greater contribution limits and company contributions if you choose to?”

“I guess as long as you have the expertise, it makes more sense to just…”

“And since you have that expertise on the phone with you right now…?”

“Got it! Thanks David!”

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