Hi,My employer just announced that we will have a SIMPLE IRA plan available in January this year. They noted that a broker will be coming to discuss our investment options with each of us as well. I am not very familiar with SIMPLE IRAs, but from my understanding they are self-directed (e.g. I can buy a Vanguard fund if I want, I am not limited to employer-provided choices and the inevitable fees).Does anyone know if I am right? I would prefer to use MMF I choose rather than what they will offer I am guessing.Thanks in advance!
Hi,We have a SIMPLE IRA at my work, and according to our agreement, it is self-directed. I believe you would probably see the same paper work. However, I was not aware that it was self-directed until someone else discovered this and moved her account from the broker to E-trade. I believe your company is taking the same approach mine did when it set up the SIMPLE IRA. It presented the SIMPLE IRA as a vehicle that had to go through a particular broker of the company's choice. In reality, the person who set up the SIMPLE IRA was a friend of someone who worked for the broker, and he was simply throwing business to his friend, w/o accurately presenting the myriad of choices available to us. So it seems having a broker discussing your options is just his opportunity to sell you something. But again, check the agreement before investing with any particular entity. For that matter, check the agreement before signing up for the SIMPLE IRA. For example, are you comfortable with your company being able to withhold your contribution from your salary for up to 30-45 days after you receive your paycheck? That's a clause in our company's agreement that worries me sometimes when money is tight.airwid
I selected & administer my CO's SIMPLE IRA and believe in many ways it is superior to a 401 (k). Fidelity is our custodian. We match 3% immediately (no vesting), fees are marginal ($300 / year paid by the co.) and Fidelity offers many no load & low expense (20 - 40 basis points) funds - some of the lowest out there period. While a SIMPLE IRA is self directing, you are limited to the funds the custodian offers your plan. You are not able to use any brokage you want, and you may be limited in your mutual fund selections. I tell employees they should stay diversified to protect they're savings (and they're capital) for the long haul. One draw back vs. a 401(k) is that a 401 (k) will allow a greater amount of $ ($4,000 in 2002) to be withheld. But I think if you have more income you want to put away, a Roth IRA and a brokerage a/c would be the way to go. Plus the immediate vesting can't be beat; esp. in today's job market. Good luck and be sure to at minimum put aside the maximum amount matched by your employer.
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