What to do with my SIMPLE-IRA

For those of you that don't know, a SIMPLE-IRA is an IRA account for employees of Small business that provide a Match for retirement accounts. Its kinda like a poor man's 401-k. A SIMPLE-IRA has smaller administrative costs than a 401, but may also be more limited in its options. At my company, you can only invest in loaded American Funds funds. I have tried to find the right combination of historical returns vs. expense ratio with the funds that I have available.

When I first got into our s-IRA, I was under the misguided impression that I had to get the B-Class shares because of my lowly status. This was a miscomunication as it turns out so I have half of my portfolio in some suck-ass B-shares, but they should convert to A-Shares after 7 years so that mistake can be quickly forgotten about. I may actually have benefitted by getting into the A-Class level later when the total IRA holdings of my small company were larger, hence the sales charge was lower.

My contributions now go into the A-Class shares that have a steep up front sales charge. But at least now it is somewhat lower because as a SIMPLE-IRA participant I am discounted at the rate of the holdings of my entire company's contributions. This is were being in a SIMPLE-IRA plan really helps when you are stuck with loaded funds I think. At least you are discounted on the holdings of the group, as opposed to just yourself.

Regardless, I am now on my way to funding my Roth, even if its just a small amount right now. Hopefully it is easy to increase the monthly allotment. If not, I should be able to buy into other funds easily and diversify this IRA a little. But Roth's max out with 4K in 2007, and 5K in 2008 so those are the ultimate goals, no matter how much you are making. So thats only $417 a month/apiece. Plus, the beauty of the Roth is that, since you have already paid taxes on it, you could withdraw what you put into it without penalty, should the need arise.

One final note that I would add is be prepared to allocate to which year you wish to put the funds you allocate into. With these "Asset Builder" plans you may apply funds extracted all the way up to April 15th on the previous year. With regards to Roths, I see no reason not to apply as much as I can to the previous year. Until you regularly max it out, it seems you should always play catch up unless you are unelgible to contribute. Traditional IRA's will have tax concerns to account for that will have to be considered that are beyond the scope of this post.

So that's all I have to say about my first attempt at opening a Roth. I'll let you know how it progresses. I also don't know how screwed I might possibly be if I can't make the contribution each month. But thats why I went with a low amount to get the account set up.