Individual 401K versus SIMPLE IRA for someone newly employed
SCENARIO: I left self-employment April 1 to go to work for a nonprofit. As a self-employed individual, I contributed pre-tax to an individual 401K for many years. The nonprofit I work for has a retirement plan where they match contributions (up to 3%) via a SIMPLE IRA set up through a local bank. The bank invests the SIMPLE funds in a mutual fund family with a 5.25% front end load!!!
QUESTION: Can I continue to make pre-tax contributions to the Individual 401K even though I have access to the SIMPLE IRA through my employer? Also, if the rules stay the same as they are today, will I be able to do so in future years? (Yes, I will contribute the 3% to collect to company match, but want to avoid the 5.25% load on the balance of the funds I plan to contribute. I expect to save approx $675 a year in fees.)
THANKS FOR YOUR HELP!!!!
Permalink Submitted by mk foss on Fri, 2009-07-03 23:31
If you have more than one employer, you can participate in more than one retirement plan. You stated that you “left self-employment” which indicates that you only have one employer. The individual 401k was based on income from your self employment, you cannot use earnings from another employer to justify a deduction.
Individuals who are employed by one entity (that they own less than 5% of) and also operate a side business can participate in retirement plans of both businesses and have a larger overall contribution limit than those with just one job.
Denise is the expert here, she may have additional comments.