- 1). Examine the requirements for each type of plan and make sure you meet them. A Simple IRA is designed for business owners and self-employed individuals, so if you work for someone else you probably will not qualify.
- 2). Look at the contribution limits for each type of plan. If you have access to a 401k through your employer, you can contribute up to $16,500 each year through payroll withdrawals. If you are age 50 or older you can add an additional $5,500 in catch-up contributions as well. For a Simple IRA, the 2010 contribution limit is $11,500 for those under 50 and $14,000 for those 50 and older. These limits change from time to time, so be sure to check with the IRS, or with your accountant, for current contribution limitations.
- 3). Compare the fees and expenses of the Simple IRA and 401k plans you have available. Contact the mutual fund family handling the plans and request a prospectus for the funds the company offers. Look at the fees and expenses carefully before investing. Keeping your fees low is an important part of building a retirement nest egg. When comparing fees, keep in mind that index funds charge as little as 0.19% in annual expenses.
- 4). Ask how often you are permitted to move money around and make changes to your asset allocation. The ability to move money into or out of stocks when you need to can be a big benefit. Some plans restrict participants to one or two moves a year, so be sure to get clarification on this important matter.
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