Question RE: contribution limits for 2019

[philli14]

Hi all,

My current employer provides a SIMPLE IRA. I was planning on having 540$ deducted from each paycheck (bi-monthly) to reach the $13,000 contribution limit for 2019.

However, there is a chance that I could be changing employers in August of 2019. As a result, I may consider changing my contributions to 928$ per paycheck to reach the $13,000 by the end of July.

My question(s):
1) If my new employer (I don't know where I would be working but I'm travelling cross country) offers a 401k, are my contribution limits for said 401k limited at all by my SIMPLE IRA? Or will I be able to put $13,000 into SIMPLE IRA and $19,000 into 401k?
2) Anything special I need to know if I do this? Weird tax implications, etc?

Thanks in advance!

[walkwalkwalk]

It is limited to 19k total (if you end up being covered by a 401k at new job), so you could put 6k into the 401k. I would save room to contribute to the 401k more since 401k's usually have better investment choices. All of the investment choices I've ever had in SIMPLE's were awful, 1-1.5%+. YMMV

[philli14]

It is limited to 19k total (if you end up being covered by a 401k at new job), so you could put 6k into the 401k. I would save room to contribute to the 401k more since 401k's usually have better investment choices. All of the investment choices I've ever had in SIMPLE's were awful, 1-1.5%+. YMMV

Thanks! My SIMPLE IRA is with Fidelity (no account fees), and I have all of it invested in a combination of FDKLX (Target date 2060) ER 0.19, and FZROX (Zero total market) ER 0.00. Based on my limited knowledge these seem like pretty good options, not sure I would get much better in a future, potential 401k.

[walkwalkwalk]

Forgot to mention, SIMPLE's are horrible about rolling over (can only be to another SIMPLE plan unless you wait 3 years). So there's that too.

[philli14]

Forgot to mention, SIMPLE's are horrible about rolling over (can only be to another SIMPLE plan unless you wait 3 years). So there's that too.

Didn't know that. Do you know if it a 3-year wait from the last contribution? Suppose I should do some more research into things like that. Thanks for bringing it to my attention.

[walkwalkwalk]

Sorry, I misspoke. It is a two year period beginning when the 1st contribution is made, see below.

The Two- Year Period
The two-year period begins on the day the first contribution is deposited to a participant’s SIMPLE IRA and ends two years after that date. The financial institution may use the information that is made available to determine whether the two-year period has been satisfied. However, they are not required to rely on the information that is provided. Instead, they can choose to use the information for contributions that were made to the SIMPLE IRA while they served as trustee/custodian.
 
Example:
John established SIMPLE IRA # 1234 with custodian XYZ. The first SIMPLE contribution was made to John’s SIMPLE IRA on April 1, 2008. John transferred the assets to SIMPLE IRA # 5678 at Custodian PQR in December 2008, and a SIMPLE IRA contribution was made to account # 5678 on January 15, 2009. If John decides to take am distribution form SIMPLE IRA # 5678 on May 1, 2010, and he is under age 59 ½, he will owe the IRS an early distribution penalty of 10% of the amount withdrawn. Custodian PQR would report the amount as a SIMPLE IRA distribution before the two-year period, because their records shows that the first contribution was made to the account on January 15, 2009, resulting in a report to the IRS that the amount is subject to a 25% penalty, instead of the 10%. However, Custodian PQR may accept copies of the statements for SIMPLE IRA # 1234, showing the contribution being made on Mary 1, 2008 and the transfer being made to SIMPLE IRA # 5678, and use that as basis for reporting the SIMPLE IRA distribution as one that occurred after the two-year period. However, they have the right to choose not to accept the documentation and process the distribution based on their own records.