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Best SIMPLE IRA Plan



Overview of Ally Invest's Small Business IRA

Small businesses that would like to help their employees save for retirement can setup a SIMPLE IRA at Ally Invest. The broker offers certain advantages for IRA's, but it also has various weaknesses. Let's take a look at Ally Invest's retirement offerings and see how they compare to some of the firm's rivals.


SIMPLE IRA

A SIMPLE IRA is designed for businesses with fewer than 100 employees. Any company larger than this cannot open a SIMPLE plan under IRS regulations. In a SIPMPLE IRA, the employer makes contributions, and the employee may or may not. The employer can match the employee's contribution up to 3% of salary, or contribute a flat 2%, which is not matched. In either case, the employer, but not the employee, is required to make contributions.

Employees must earn at least $5,000 in a year to contribute to a SIMPLE retirement plan. The contribution limit is $12,500 per year. Participants over the age of 50 can deposit up to $15,500 annually.


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Opening a SIMPLE IRA at Ally Invest

To open a SIMPLE IRA with Ally Invest, you have to fill out a paper form and send it to the broker. Ally Invest will accept the document either through snail mail or via fax. You also have to create a username and password (check out their promotion offers: Trade stocks for $4.95. No minimums. ), then call the firm and link the SIMPLE account to the username. The broker instructs applicants to click on "Continue' on its application page, but then stop the application process after doing so. The firm's SIMPLE IRA opening process seems overly complicated.


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Fees, Commission, and Account Requirements

The broker's regular commission schedule applies to SIMPLE IRA's. Stock and ETF trades cost a very low $4.95. Options are just 65¢ extra, another industry low. Using a live representative over the phone for assistance in placing a trade adds an additional $20.

Retirement accounts at Ally Invest come with an annual fee of $50. Thankfully, it can easily be avoided simply by maintaining a balance of $2,500 or more. Alternatively, placing one trade per year also avoids the fee. There is no charge to establish a SIMPLE IRA.

The broker does charge $50 for closing an IRA. Transferring securities to another firm incurs a $10 charge per asset, with a $50 maximum. Transferring a whole account costs $50. Since a Ally Invest IRA has a $50 termination charge, transferring an entire IRA actually costs $100—$50 for the closure of the account and $50 for the transfer.


IRA Resources and Educational Materials

The Ally Invest website has resources for investment education. These include articles and videos on a wide range of topics that will be of interest to retirement savers. One on-demand webinar is for new clients. It is over an hour long. A lengthy article discusses the advantages of index mutual funds. Resources can be sorted by experience level or by security type.

Live events are also hosted periodically. A calendar on Ally Invest's website lists live upcoming educational events with registration instructions. A list of recommended investment books also appears on the broker's website.


Mutual Funds and ETF's

The Ally Invest mutual fund screener returns 8,260 products that are open to new investors. Unfortunately, the firm does not offer any funds that have both no load and no transaction fee. Instead, every load fund at Ally Invest is free to trade, while every no-load fund is $9.95. This transaction fee is applied to sales, purchases, and exchanges. Some of the funds available from Ally Invest are target-date funds, which are designed for retirement savers.


Fixed-income Selection

There is a good fixed-income assortment at Ally Invest. These assets tend to be stable in value and pay a regular stream of income. As such, they might be a good investment for people in or near retirement.

Bonds cost $1 each at Ally Invest, with a $10 minimum and a $250 maximum. U.S. Treasury bonds have no transaction fee, although there is a markup or markdown in their prices. These adjustments compensate the broker. Certificates of deposit can also be purchased in a Ally Invest SIMPLE IRA. They cost $24.95 per transaction.


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Comparison

Fidelity charges a $25 annual fee for SIMPLE IRA's. There is no way to avoid this charge, which makes Ally Invest's system all the more attractive. However, Fidelity has a lot more educational resources on its website. Investors who need more guidance might find the $25 annual fee worth it.

Vanguard customers can open a SIMPLE retirement account. Like Fidelity, the broker charges a $25 annual fee. However, the fee is assessed on every Vanguard fund in the account. So for example, if a SIMPLE IRA had three Vanguard funds, the account would be charged $6.955 per year. Vanguard waives the fee policy for accounts above $50,000. Vanguard also has retirement specialists who can be reached by phone, whereas Ally Invest does not.


Account Management Services

Retirement savers who aren't confident enough in their own ability can hire the services of Ally Invest's affiliate. Called Ally Invest Advisors, this company can manage a SIMPLE IRA for only 0.25% of its value per year. Although this management fee is very low, the firm does not use a computer program to buy and sell securities in the account. It actually uses a human advisor, which is pretty remarkable given the very low advisory fee.

The program only trades low-cost ETF's, which obviously takes stocks and mutual funds out of the picture. Nevertheless, there are no commissions charged for the ETF transactions in a managed account.


Best SIMPLE IRA Plan Recap

Many consider Ally Invest's SIMPLE IRA plan to be the best value because of low fees and commissions. It works especially well for beginner and long term buy-and-hold investors.


Open SIMPLE IRA Account

Trade stocks for $4.95. No minimums.

Ally Invest


Article was updated on 2/18/2017.




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