Author Topic: SIMPLE IRA vs Roth  (Read 4186 times)

reecem13

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SIMPLE IRA vs Roth
« on: April 26, 2015, 03:52:27 PM »
Hello.  Ive been trying to learn a lot more about investing lately.  I'm looking for help in relation to my 3% company match IRA that I've been participating in for about a year and a half now.  When first becoming eligible to participate, I was all about it and invested as aggressively as I could.  however, after the first year, and very disappointing results, I decided to get more involved.  When the adviser comes to our office, he seems to want to overwhelm everyone with so much information about how great the fund is and all the technical jargon he can so people ask as few questions as possible.  Then, when a question is posed, he acts as though its ridiculous and we should just trust him and keep sending more money.  Its probably obvious that I've never cared for the guy.  Personal feelings for him aside though, if he's worth what seem to be the very high fees associated, then I'll stay.  However, since researching and looking around at other funds, I feel I'm not getting the full value of my money with him.  My current fund is as follows:

Primerica SIMPLE IRA

100% in FKINX

initial sales charge of 4.25%

overall expense ratio of .61%

I cant get into any growth fund on my list of options for any cheaper.  In fact, the growth funds are more expensive with around a 5-5.5% sales charge and .90% ER.  I really hate to give up a 3% employer match, but it seems like i could come out better with a Roth through vanguard or fidelity.  It seems as though the match plus some of my contribution is getting eaten up by the fees.  I'm very new to this, so sorry for any ignorance.  Any advice is greatly appreciated.  I'm trying to get my retirement on track.

MDM

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Re: SIMPLE IRA vs Roth
« Reply #1 on: April 26, 2015, 05:27:10 PM »
Hello.  Ive been trying to learn a lot more about investing lately.  I'm looking for help in relation to my 3% company match IRA that I've been participating in for about a year and a half now.  When first becoming eligible to participate, I was all about it and invested as aggressively as I could.  however, after the first year, and very disappointing results, I decided to get more involved.  When the adviser comes to our office, he seems to want to overwhelm everyone with so much information about how great the fund is and all the technical jargon he can so people ask as few questions as possible.  Then, when a question is posed, he acts as though its ridiculous and we should just trust him and keep sending more money.  Its probably obvious that I've never cared for the guy.  Personal feelings for him aside though, if he's worth what seem to be the very high fees associated, then I'll stay.  However, since researching and looking around at other funds, I feel I'm not getting the full value of my money with him.  My current fund is as follows:

Primerica SIMPLE IRA

100% in FKINX

initial sales charge of 4.25%

overall expense ratio of .61%

I cant get into any growth fund on my list of options for any cheaper.  In fact, the growth funds are more expensive with around a 5-5.5% sales charge and .90% ER.  I really hate to give up a 3% employer match, but it seems like i could come out better with a Roth through vanguard or fidelity.  It seems as though the match plus some of my contribution is getting eaten up by the fees.  I'm very new to this, so sorry for any ignorance.  Any advice is greatly appreciated.  I'm trying to get my retirement on track.
If the company is matching your 3% with the same amount of dollars, you are better to invest in the IRA despite the fees.  If the company is adding 3% to what you contribute then it is not a good deal.

E.g., if you make $10K and contribute 3% = $300, does the company also contribute $300 or do they contribute $9?

ETA: you said no "growth fund" is available, but what choices of funds (and their fees) do you have?
« Last Edit: April 26, 2015, 05:29:46 PM by MDM »

reecem13

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Re: SIMPLE IRA vs Roth
« Reply #2 on: April 26, 2015, 06:29:32 PM »
As far as the funds I have to choose from, I'm stuck with a list that is only franklin Templeton funds. They are just their brands of index funds and they're all about the same as far as front load charge. 
 My company Matches my contribution up to 3%. So if I make $10,000 and contribute $300, they contribute $300.  Also, I forgot to include that in addition to the front load, the adviser that manages our accounts gets 4% of the dividends. So if I make 7% in a quarter, he gets 4% and the other 3% gets reinvested.

MDM

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Re: SIMPLE IRA vs Roth
« Reply #3 on: April 26, 2015, 06:44:39 PM »
As far as the funds I have to choose from, I'm stuck with a list that is only franklin Templeton funds. They are just their brands of index funds and they're all about the same as far as front load charge. 
 My company Matches my contribution up to 3%. So if I make $10,000 and contribute $300, they contribute $300.  Also, I forgot to include that in addition to the front load, the adviser that manages our accounts gets 4% of the dividends. So if I make 7% in a quarter, he gets 4% and the other 3% gets reinvested.
Well, that's terrible.

I have no experience with a SIMPLE IRA, but you might want to verify the following from http://www.irs.gov/pub/irs-drop/n-09-66.pdf:
Quote
In general, a SIMPLE IRA plan must permit each eligible employee to
select the financial institution to which SIMPLE IRA contributions are made on
behalf of the employee. Alternatively, an employer is permitted to establish a
SIMPLE IRA plan with a designated financial institution, so that all contributions
under the plan are made to SIMPLE IRAs at the designated institution. In that
case, an employee must be given a reasonable period of time each year in which
to transfer his or her SIMPLE IRA balance without cost or penalty from the
designated financial institution to a SIMPLE IRA at another financial institution
selected by the employee.
If that's true, you can do whatever you want.  Sure would be nice....

reecem13

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Re: SIMPLE IRA vs Roth
« Reply #4 on: April 26, 2015, 07:10:23 PM »
Wow. I would never have thought that was an option. I just thought I was stick with that advisor/fund. Since I fall into the second category of having a fund already, I still don't know if it helps much since it sounds like I would still be subject to all the fees throughout the year then get to move the yearly contributions to a new account.

TomTX

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Re: SIMPLE IRA vs Roth
« Reply #5 on: April 26, 2015, 08:36:52 PM »
Massive ripoff. Get your company to move the SIMPLE IRA to Vanguard.

Runge

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Re: SIMPLE IRA vs Roth
« Reply #6 on: April 26, 2015, 09:13:37 PM »
Wow. I would never have thought that was an option. I just thought I was stick with that advisor/fund. Since I fall into the second category of having a fund already, I still don't know if it helps much since it sounds like I would still be subject to all the fees throughout the year then get to move the yearly contributions to a new account.

Do you have the option to NOT select one of those funds and just keep it in cash until you can transfer to vanguard? I'd talk to your HR department soon about this. Be sure to do some more research on Simple IRA's first so you can be sure they're not trying to mislead you.

Druid

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Re: SIMPLE IRA vs Roth
« Reply #7 on: April 26, 2015, 10:02:28 PM »
I would not contribute as a form of protest. Max out an IRA with vanguard and put the rest in taxable accounts. I would gladly give up the 3 percent to keep those evil bastards from getting a dime of my money. Honestly the benefit package would be enough for me to look for another employer. Before drastic measures I would probably contact the guy in charge of picking the plan and ask him to offset the high costs you are paying with the obvious kickbacks he is receiving(perhaps remind him of his fiduciary duty).

reecem13

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Re: SIMPLE IRA vs Roth
« Reply #8 on: April 27, 2015, 01:58:22 AM »
We don't have an actual HR department. This is a small company with only 10-20 employees depending on the time of year. Its not enough to leave the job over, as the pay, work atmosphere and health insurance are all very good. I think this is just a case of the owner getting talked into this fund by this guy or maybe getting a better deal than the employees and not knowing that. I'm definitely going to stop contributing, and will try to talk the owner into switching or maybe at least allowing me to open another account and contributing directly to that instead of transferring out once a year. Thank you for the replies. It seems very difficult to find any information on SIMPLE plan fees for broker/dealers and custodians as compared with traditional plans.

matchewed

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Re: SIMPLE IRA vs Roth
« Reply #9 on: April 27, 2015, 08:12:26 AM »
We don't have an actual HR department. This is a small company with only 10-20 employees depending on the time of year. Its not enough to leave the job over, as the pay, work atmosphere and health insurance are all very good. I think this is just a case of the owner getting talked into this fund by this guy or maybe getting a better deal than the employees and not knowing that. I'm definitely going to stop contributing, and will try to talk the owner into switching or maybe at least allowing me to open another account and contributing directly to that instead of transferring out once a year. Thank you for the replies. It seems very difficult to find any information on SIMPLE plan fees for broker/dealers and custodians as compared with traditional plans.

Even if there is no HR department someone is making the decisions for these things. Find other employees who want similar things to you and appeal to that person. Just guessing it's about what the owner is getting talked into doesn't matter. What matters is the action you can take on it.

ac

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Re: SIMPLE IRA vs Roth
« Reply #10 on: April 27, 2015, 08:28:37 AM »
You should get the company match.

Here are your priorities with the goal of increasing your net worth:

1.  get the match
2.  max out a HSA via payroll to save the fica taxes in addition to state and fed income tax
3.  max out a traditional IRA
4.  go back and max out the rest of your SIMPLE
5.  invest in taxable account at vanguard

I speak from experience. 

A few years ago I was at a 10 person company with a SIMPLE IRA through a broker that routed us to American Funds.  5% initial sales fee.  High expense ratios yielding poor results.

2 years ago I started in with another guy for our 2 person company.  I was shocked how easy it is to set up a SIMPLE IRA with Vanguard.  You fill in like 10 blanks in a form that's a few pages long.  Really not a big deal.  No initial sales fee.  Low expenses.  Of course.

https://investor.vanguard.com/what-we-offer/small-business/simple-ira?WT.srch=1