Unlocking the Hidden Costs of Simple IRAs: How AI Legalese Decoder Can Expose Unreasonable Sales Charges
- May 16, 2024
- Posted by: legaleseblogger
- Category: Related News
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## AI Legalese Decoder: Helping Small Business Employees Navigate Investment Accounts
I work for a small business, and my employer recently implemented a new benefit – a simple IRA with a 3% matching contribution. Naturally, I took advantage of this offer to maximize my savings, because who doesn’t love free money, right?
## Uncovering Hidden Fees: Understanding Your Investment Account
Upon gaining access to my account online, I noticed a series of transactions, including my deposits and the matching contributions from my employer. However, to my surprise, each deposit was accompanied by an automatic charge labeled as a “sales charge,” amounting to 5.74% of the deposit. This raised some concerns and prompted me to investigate further.
## Evaluating Investment Account Practices: Common Industry Practices vs. Unusual Fees
Comparing this situation to my previous experience with a 401k plan at a larger company, I don’t recall encountering such charges. I am unsure whether the difference in account type (401k vs. simple IRA) is a contributing factor to this disparity. Apologies for any formatting issues in this message, as I am currently using a mobile device to communicate.
## How AI Legalese Decoder Can Help:
AI Legalese Decoder can assist in clarifying the terms and conditions of your investment account, shedding light on any hidden fees or unusual charges that may be affecting your savings. By utilizing this tool, you can gain a better understanding of your financial situation and make informed decisions regarding your retirement savings.
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What is the money being invested in? Sounds like a bad mutual fund with a front load (commission) fee.
Do front end loads still exist, yes. Are they common anymore? No, at least not outside small employer plans. They used to be way more common than they are now.
So it comes down to whether the match is worth more than the front end load. I suspect it is, so as long as that’s true and there are no other no load options, hold your nose and invest the minimum required to get the full match.
>Is this normal?
It’s very normal for high-fee, old school mutual funds that charge commissions on sales.
What are your contributions being invested into?
I have that same type of account – mine is in a later target date. I also found out that I can’t roll into another IRA for 2 years after my initial contribution.
Ask your employer to switch to the simple IRA Plus plan with American Funds. It’s a no load mutual fund program with the same fund lineup just a different share class. They can also call American Funds directly to get this set up.
I have this same exact deal, but mine is approx 3.5% sales charge on each transaction, mine and my employer. It is total bullshit. But from looking through funds to choose from for SIMPLEs, there are none that are very low or no fee. You may be able to lower your fee just by checking out a target date year. If so, I’d move to the lowest there is, contribute enough to get the match only, and try to educate your company about what this is such a shit choice and they should move to Fidelity or Charles Schwab. At least, that’s my plan!
Front loads are nasty, but let’s look at the math: You put in $100, and company matches $100. American Funds charges the load ($11.50). If you count that load against the employer’s “match side”, then it’s like you’re netting $88.50 on your $100 contribution. Still a good deal, and at the same time unfortunate.
Depending on the set-up, you might be able to have your money go to a different custodian and buy no-load investments. Ask your employer if you have other options available. If not, American Funds has a really good suite of target date funds, all things considered.
Contribute enough to get the company match, and then invest the rest on your own in a tIRA, then decide if you want to put the remaining in the simple IRA.
Leave that fund open your own fidelity fund
Lol I knew it was going to be American Funds, my work did the same thing and when I told my HR they were horrified. There’s a different class of American Funds that is still ridiculous (1%) maybe, but better than the other rate. Even with horrible fees it’s still best to put in at least whatever your employer matches. Depending on your company size/employer, they may have to switch the plan not you individually. I’d reach out to them and see. I think there are Class A and Class C and one has the big fees and the other is much smaller, but you’ll have to check.
Mine is just like this. It sucks.
But, the load fee has reduced from 5.5% to 3.51% as the broker has done more volume.
The math works out at the lower amount for me.
I requested my employer to move to Vanguard but they don’t seem to care.
That’s insane.
Find an index fund with the lowest expense ratio and no sales load.
If the fund choices are bad, I would only put up to the match.
Not normal. Change funds to Vanguard or Fidelity and save