Small Company SIMPLE IRA Plan

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muddlehead
Posts: 203
Joined: Mon Sep 22, 2008 2:03 pm

Small Company SIMPLE IRA Plan

Post by muddlehead » Thu Feb 02, 2017 12:13 am

Do any of you own a small company and with a SIMPLE IRA plan for you and the employees? My son co-owns a moving and storage company with 10 employees, and growing. He wants to start a retirement plan - for himself and the employees, if they want to partake. I went with him to meet my broker.It was decided a SIMPLE IRA plan would work best for him and the company. It sounds easy and strait forward enough. Researched a bit online. I think I've got a pretty good grasp of the basics. Anyone have some real life situations/problems with this kind of plan?

bogleenigma
Posts: 241
Joined: Sun Jul 29, 2012 11:19 pm

Re: Small Company SIMPLE IRA Plan

Post by bogleenigma » Thu Feb 02, 2017 12:29 am

Muddlehead,
Please tell your son to avoid brokers as they are all con artists. The broker will find some way of extracting ridiculous fees from him and will put your son's employees in actively managed funds. If your son's employees are reasonably intelligent they may even grow to resent him for setting up such a ridiculous plan. Just tell him to call Vanguard and get it set up with them and leave the broker out of this transaction.
https://investor.vanguard.com/what-we-o ... simple-ira

renue74
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Joined: Tue Apr 07, 2015 7:24 pm

Re: Small Company SIMPLE IRA Plan

Post by renue74 » Thu Feb 02, 2017 12:49 am

Yes...I have a small web design firm....4 employees. Three of them (including me) participate in a SIMPLE IRA.

Really easy to manage, not very expensive, we just tell ADP payroll to deduct 3% for the employee contribution and we send in a monthly check with our 3% contribution to Vanguard. Employees do all the fund picking.

Only downfall I see is the max employee contribution is $12,500/year. If you set up a 401(k), your max contribution is more.

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baw703916
Posts: 6679
Joined: Sun Apr 01, 2007 1:10 pm
Location: Seattle

Re: Small Company SIMPLE IRA Plan

Post by baw703916 » Thu Feb 02, 2017 12:59 am

My employer (eight employees) has a SIMPLE IRA with Fidelity. You have to be a little more judicious in your choice of funds than with Vanguard, but you can put together a very reasonable portfolio of index funds there as well.

Yeah I really don't get why the contribution limit is lower than for a 401k though... :annoyed
Most of my posts assume no behavioral errors.

Spirit Rider
Posts: 8904
Joined: Fri Mar 02, 2007 2:39 pm

Re: Small Company SIMPLE IRA Plan

Post by Spirit Rider » Thu Feb 02, 2017 2:44 am

Another vote for Vanguard or Fidelity.

If you go with Vanguard the employes should use target date funds. Vanguard charges $25/employee fund/year.

Fidelity charges $25/employee/year.

SteveB3005
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Joined: Mon Feb 19, 2007 9:29 pm

Re: Small Company SIMPLE IRA Plan

Post by SteveB3005 » Thu Feb 02, 2017 10:01 am

No yearly fee at Schwab and lower minimums on funds. We've had a Simple there since the early 90's, I've overseen that program and few problems that I can recall.

niceguy7376
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Location: Metro ATL

Re: Small Company SIMPLE IRA Plan

Post by niceguy7376 » Thu Feb 02, 2017 10:33 am

We are a small IT Staffing firm and had SIMPLE IRA plan for 10+ years with Fidelity. We had SEP IRA for first year of existence and changed to SIMPLE.

Fees at Fidelity are very less. $25 per employee deducted from their account per year or $350 paid by employer per year for having the plan.
So if you have very less participating employees, let Fido deduct from employees or employer can pay.

As for investing options, all Funds offered by Fido are available to employees. There is no pre set options available like in 401k.
We run our payroll through online service and they deduct it from paystubs. We then go to Fido site and make employee and employer contributions online (we do monthly payroll) and it gets added to their accounts. Thus it is an extra step for us but well worth it.

gilgamesh
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Joined: Sun Jan 10, 2016 9:29 am

Re: Small Company SIMPLE IRA Plan

Post by gilgamesh » Thu Feb 02, 2017 10:52 am

I've had a simple IRA with Schwab. All funds available, low ER, no fee of any sort. 24/7 excellent customer service.

I very much doubt my tax savings is less than the 3% match I do for employees. If I factor the taxers upon withdrawal, it certainly is not. However, a good perk for employees.

muddlehead
Posts: 203
Joined: Mon Sep 22, 2008 2:03 pm

Re: Small Company SIMPLE IRA Plan

Post by muddlehead » Thu Feb 02, 2017 11:27 am

Great. Thanks all. Schwab is the broker. Seems like this could work.

Spirit Rider
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Joined: Fri Mar 02, 2007 2:39 pm

Re: Small Company SIMPLE IRA Plan

Post by Spirit Rider » Thu Feb 02, 2017 11:43 am

Sure Schwab is fine. When Bogelheads here the word broker they hear "full-service broker" and immediately think Edward Jones, Raymond James, or other brokers with high front-end loads and even higher expense ratios. Hey, why do the crooks always use two names?

Small company owners seem to be drawn to really bad SIMPLE IRA plans for their employees. We see many. many employees a year here on Bogleheads who come for help with their bad SIMPLE IRAs. The worst are almost always terrible 5305-SIMPLE plans with crippling costs to the employees. The company owners either are victims of these poor investment choices in their own portfolios, the broker is family or "friend", or some affinity relationship (business, religious, recreational pursuit, etc...)

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