How to Select a Simple IRA

If you have a small business that is under 100 employees and not expecting to grow larger than that, then you may want to take a serious look at establishing a Simple IRA for your staff. If the plan seems to be a good fit for your company then you need to find the right investment vehicle for the plan. It is a little difficult to select a Simple IRA when you look at all the choices that are available. Read on to learn more.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Brochures from several sources
• Access to a company representative for questions

1. Find the selection of investments from the company that you choose. Are the funds that are offered comprehensive enough to cover all investment categories? In order to judge the mutual fund family use the parameters that are outlined in the eHow article, “How to Choose a Mutual Fund Family”. The link is found in the resource area.
2. Choose a vehicle that has low fees. Some companies charge the investor a fee. The investor in the case of the simple plan is the employee. In a down market time the fee just adds insult to injury when it is taken out of an already dwindling account. In order to avoid rumblings from the back room, find out how much the fees are.
3. See if they are on line. Some companies offer the service of online access to the accounts. This is an option that can help not only employees to manage their accounts, but the business owner as well. Not only are balances shown, but also contributions and matches. The employer can see if all were applied correctly
4. Look for a guarantee. Newer annuities offer their products and a prototype for Simple Plans. Many of the annuities have guarantees that will show a specific percentage of growth regardless of the market conditions. Check to see if any of the companies offer these guarantees when you are selecting a Simple IRA.
5. Find out whether the investment will be A, B, or NAV shares. If you choose a mutual fund for your Simple IRA plan then the representative will make recommendations. If the shares are A shares, a fee is charged up front and there are annual 12b-1 fees. If B shares are chosen there is no up front fee but there are higher annual 12b-1 fees. There is also a deferred sales charge that goes away after a number of years. This charge is calculated on each deposit by the date they are deposited. NAV means net asset value and has no fees up front or on the backside, but does have 12b-1 fees.
6. Check for continued service. If you are purchasing the funds from a registered representative see if they come to your business for semi-annual or annual employee sign ups and meetings.

Tips & Warnings

• If you select B shares in a mutual fund and choose to move your funds to a different fund family at a later date, there will be surrender fees on newer deposits, usually less than 7 years old.