Author Topic: SIMPLE IRA Question  (Read 1420 times)

GCinOKC

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SIMPLE IRA Question
« on: April 24, 2015, 01:33:39 PM »
So, I will just get it out of the way up front, I'm quite uneducated about investing, retirement plans, etc. so I'm trying to play catch-up quickly. I posted a couple days ago about financial adviser advice and have been reading on the site when I can and appreciate the feed back I've gotten thus far. I'm starting the push for early financial independence a little later than I would have liked, but alas, here I am. I'm 31 and more or less just getting started.

I started contributing to my employer's SIMPLE IRA plan about 2 years ago. Currently due to us trying to pay off debt from our previous lives as over-spenders, I am only putting 3% of my check into the SIMPLE IRA plan, which my employer matches. This is the max they will match. This ends up being about $4,655/yr, so not much. Prior to this week, I thought it was just a Traditional IRA, so I thought I could only put $5,500 into it so I haven't upped the amount. Again, admittedly I am ignorant about these things...now I have realized that you can put up to $12,500 into a SIMPLE IRA in 2015. I am checking with my employer as to when I can increase the amount I put in and waiting to hear back. So, with that in mind, I have read some on SIMPLE IRA's and that they aren't actually ideal due to the fee's and such? I read a little about transferring the money into a Vanguard account or something like that? Can someone explain a little of this to me in very simple terms? I know the account is through Ameriprise Financial which I have no idea if that is bad or not, but from what I've read, it's probably got high fees and not the ideal place to leave this money as I start contributing significantly more.

I was also curious if someone could explain how I should go about a 401k plan in addition to this SIMPLE IRA? Since my employer does not offer the 401k do I have to set up one for myself? I'm actually in the process of possibly setting up a side company myself (I work as a project manager for a general contractor and am setting a company up on the side to do some side work myself, just waiting to see how realistic it is after I get the insurance quotes, etc.). I guess I could set up the 401k through my side company?

Again, thank you to all of you that read through all of these very long posts and take the time to respond and help those of us that are just getting on the right path!

Mother Fussbudget

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Re: SIMPLE IRA Question
« Reply #1 on: April 24, 2015, 02:23:11 PM »
Your questions are a little scatter-shot, so forgive if people are slow to tackle the issues. 

DrFunk suggested in another thread that a 20-something couple should read ALL of The MadFIentist... I second that suggestion for you.  Especially this:
     http://www.madfientist.com/retire-even-earlier/

Since you started CONTRIBUTING to the SIMPLE IRA 2 years ago (must be 2 years from the date of original contribution), you can avoid the 25% early withdrawal penalty.  You're still subject to the standard 10% withdrawal penalty for those under 59-1/2.  However, if your income is under the limits allowed for a Roth IRA, you could consider a SIMPLE IRA to Roth IRA conversion 'ladder'.  While I recommend you read jhcollins 'Stocks' series, this post from The MadFIentist is my favorite on the topic:
     http://jlcollinsnh.com/2013/12/05/stocks-part-xx-early-retirement-withdrawal-strategies-and-roth-conversion-ladders-from-a-mad-fientist/

Setting up a solo 401K would be simple.  Most investment firms offer one - Vanguard's is:
     https://investor.vanguard.com/what-we-offer/small-business/individual-401k.

You should consider doing a case-study where you give more information so you can get more feedback from contributors here.  Read a couple of case studies to get the idea, and follow the steps in the sticky topic at the top of this forum on how-to create your own.

All in all, welcome to the world of Financial Independence, and all the best!