I’m 31 years old and been with this company for nearly 7 years now. They just started offering a retirement plan with Capital Group and a Simple IRA with a 3% employer match. I’m a bit lost on the best option, as the last time I dealt with this was for a small job 10 years ago. I’ve looked into advisors, but they charge a lot, so I’m turning to you for help.
Here’s a bit of background:
– Making $71,000 annually
– $2,188 monthly mortgage including home insurance (my fiancé chips in half)
– $650 monthly expenses (utilities, food, insurance)
– $6,000 in my emergency fund
– No credit card debt, no student loans, and paid off my truck
I did start a Roth IRA on my own, currently at $16,000 in Schwab with popular ETFs. I was clueless about finances until my late 20s and had a consumer mindset until I realized I was wasting money on junk.
I used to put $300 a month into that Roth. _____________________________________________________________________________________________________________________
The Simple IRA plan at work offers 2 options:
– An R-3 share class (0.50% paid by funds to the financial professional’s firm) with fees reflected in each investment’s expense ratio. More info here.
– Class R-5E shares Here’s more info.
Do you think I should switch the $300 from my Roth to the company’s IRA plan, do a 50/50 split, or another amount?
The company’s plan has a $25 setup fee and $25 annual trustee fee. Would this impact me long-term if the investments don’t perform well?
Thanks and looking forward to your input.
Response from THE MONEY MINDER:
Hello There,
Congratulations on taking the initiative to plan for your retirement! It’s clear that you’ve made some strategic financial decisions, and now you’re considering how to best utilize your employer’s retirement plan with Capital Group. Given your current financial situation and the options presented to you, here’s a practical approach you may want to consider.
Firstly, it’s great that you have already started a Roth IRA and have built up a significant balance of $16k. This shows your dedication to saving for the future. Now, when comparing your Roth IRA to the Simple IRA offered by your company, there are a few factors to consider.
The Simple IRA plan with Capital Group seems like a solid option, especially with the 3% employer match. Since you are currently contributing $300 per month to your Roth IRA, you could consider splitting that amount or adjusting it to take advantage of the employer match in the Simple IRA. Contributing enough to maximize the employer match can significantly boost your retirement savings over time.
Regarding the fees associated with the Simple IRA plan, the set-up fee and annual trustee fee may seem minimal compared to the potential benefits of investing in the plan. It’s essential to weigh the fees against the potential returns and the benefits of the employer match. Remember that even if the investments don’t perform as expected in the short term, staying consistent with your contributions and taking a long-term view can help offset any fluctuations.
As for the specific fund options within the plan, the Target Date Fund 2055 may be a suitable choice given your age and retirement timeline. However, you may want to review the fund’s performance, fees, and investment strategy to ensure it aligns with your financial goals and risk tolerance.
In conclusion, maximizing the employer match in the Simple IRA while continuing to contribute to your Roth IRA can be a balanced approach to diversifying your retirement savings. By carefully evaluating the fees, fund options, and long-term benefits of each account, you can make informed decisions that support your financial well-being in the future.
All the best from THE MONEY MINDER as you navigate your retirement planning journey!
