The Money Mustache Community
Learning, Sharing, and Teaching => Taxes => Topic started by: The Guru on April 19, 2018, 04:19:45 PM
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HA! get it? SIMPLE question?
OK, you're right. Here's my question: my employer recently started a SIMPLE IRA plan for employees. In meeting with the guy today it was implied- a co-worker interpreted him the same way- that participation in the SIMPLE disqualified us from contributing to another (traditional, in my case) IRA. That didn't sound right. Is it?
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...participation in the SIMPLE disqualified us from contributing to another (traditional, in my case) IRA. That didn't sound right. Is it?
It is not.
You can contribute to a traditional and/or Roth IRA even if you participate in an employer-sponsored retirement plan (including a SEP or SIMPLE IRA plan). (https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-contributions)
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Excellent - just what I was looking for. Thanks for responding!
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MDM is correct.
One fun thing to add... I believe that all SIMPLE-IRAs support in service distributions. That means that if you have a reason to prefer the assets are elsewhere, you can transfer out without leaving employment which is typically required by 401ks. I think you may be required to keep the money there for 1 year but that's it. I had a SIMPLE-IRAs for 19 years before stumbling into that. Useful if you prefer vanguard, want a nice $900-$1000 brokerage bonus from Merrill edge with free trades, etc.
One downside is that it's treated as a typical ira for things for things like a backdoor Roth IRA conversion despite the fact that it's employer sponsored with higher limits and matching which would make it a lot more like a 401k, 403b.
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As stated above, you can continue to contribute to your traditional IRA. However, you are now participating in an employer-sponsored plan so your IRA contributions may not be deductible. MDM's link also links to the IRA contribution limits.
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Thanks for the additional responses.
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MDM is correct.
One fun thing to add... I believe that all SIMPLE-IRAs support in service distributions. That means that if you have a reason to prefer the assets are elsewhere, you can transfer out without leaving employment which is typically required by 401ks. I think you may be required to keep the money there for 1 year but that's it....
It is a 2 year period https://www.irs.gov/retirement-plans/simple-ira-plan-faqs-distributions