changing my Simple IRA financial institution
Thank you for the informative article. I own a business that has about 15 employees. Four of use participate in a long-running Simple IRA that allows each employee to direct into which financial institution they invest. My wife and I use a large brokerage fee that now operates under the new fiduciary rules and charges a hefty annual percentage fee. My account is grandfathered and I can keep my old financial arrangement, but I cannot invest the new money that I add (stays in cash.) As with a traditional IRA, can I simply switch to a new financial institution for any new added money and leave the old investments as they are at my old institution? Thank you.
Hello, Mark, and thank you for your question.
If your SIMPLE IRA allows each participant to choose their own custodian, then you should be able to direct your new contributions to a different custodian. However, you’re existing account with your current custodian will probably need to stay there. If your plan allows for in-service distributions or you temporarily separate yourself from service with your company – or if you reorganize the company or form a new retirement plan – then you may be able to move your existing account with your current custodian to another provider with preferable investment options and fee structures.
Given the size of your company, you may also want to look at setting up another type of retirement account. SIMPLE IRAs start to get relatively expensive once you have over a dozen employees or so, and other types of retirement plans may offer you added flexibility. One that could be especially beneficial for you could be a Safe Harbor 401(k) plan. With a Safe Harbor plan, you can contribute far more each year than a SIMPLE IRA while also avoiding a lot of nondiscrimination testing. Lastly, the matching requirements aren’t that much different than a SIMPLE IRA.
Hope this helps. Best of luck with your future retirement planning.