Invest in high fee SimpleIRA additional $ over match

[markb]

My employer is starting a simple IRA for 2016 and I'm trying to decide if I should contribute beyond the matching amount or put that money towards after tax investment account or real estate investments. Here are the details:

-All investments in simple IRA will be mutual funds with a 5.75% initial "load" fee. This is ridiculously high. It would be an obvious choice to max this out if the initial fee wasn't there.
-Simple IRA is limited to American Funds with lowest cost 0.6%/yr for an index fund type mutual fund.
-I will max out all other tax advantaged accounts available (HSA, IRA, and spouse IRA. Spouse has no work sponsored retirement plan)
-I will be in the 25% federal tax bracket for 2016
-In retirement I plan to have a lower income and very likely be in a lower tax bracket
-My net worth is split roughly evenly between home equity, taxable investment account, and retirement accounts

Anyone have recommendations on if it is a good idea to invest additional money past that required to get the match in the SimpleIRA?

[Mother Fussbudget]

Hey Markb - Welcome to the community!

Simple IRA's are a little like a 401K plan for small businesses with less-than-100 employees where there's not a 401K plan available.
You can contribute up to $12,500 per year into a S-IRA.  For a T-IRA (Traditional IRA) you can only contribute $5,500.

The front-load fee (essentially a 5% commission on all purchases) is not that great, but it's not unheard of.  You should investigate whether there are some no-load mutual funds in the Simple IRA portfolio.  "SimpleIRA,Inc" (your Simple IRA administrator) takes $50 of every $1000 invested as a flat-fee "commission" for the purchase transaction - similar to the way you pay commissions on normal stock trades.

There's no question - at a minimum, you should contribute enough to get the full match amount - it's FREE MONEY!

On whether you should contribute MORE than the match minimum, that depends on whether you want / need to reduce your taxable income.  Let's assume you want to contribute $1K. 
Taken as "after tax", you'll have $750 after-tax to put into a T-IRA.  And your T-IRA contribution might *not* be fully deductible (see link) depending on your income.
BUT... 1K contributed to the SimpleIRA, you're paying a 5% 'commission', and have $950 "pre-tax" principle in your S-IRA - $200 more than would be possible to invest in a T-IRA, and it's deductible.

Hope this helps...

[markb]

Yes I work at a small business and the Simple IRA was chosen by the employer after I requested we start a work retirement plan. I was hoping my recommendation of a 401k with low fee index funds would work, but the admin costs for that were higher than the employer liked.

It's hard to pay 5.75% ($718) to invest the $12,500 using the SimpleIRA when otherwise I would have paid $0 for Vanguard ETFs or maybe a couple of stock trades at $4 each. The tax incentives are there and it was started for me so I will go ahead and max it out.

I just feel like we are all taken advantage of by these 401k and Simple IRA companies that charge exorbitant amounts to fill out paperwork and provide account management to meet government regulations that are an unnecessary burden that we don't benefit from or care about.