Personal Investments • 401k or SIMPLE IRA for my small business?

Between the two I think you'd be better off with a 401k with Safe Harbor provisions.

In addition to the higher limits, a 401k won't interfere with the "Backdoor Roth" as a SIMPLE-IRA (and your existing SEP) will. The Backdoor Roth might be useful for you, given that you'll have to pay taxes on your income either way, you might as well put some into a Roth IRA rather than just a taxable brokerage account.

If you haven't considered the Backdoor Roth here's an explanation from the wiki:
https://www.bogleheads.org/wiki/Backdoor_Roth

Note that you can consolidate your SEP and tIRA into the 401k so that they don't interfere.

Yes, but the 401(k) costs more.

Agreed.

OP needs to compare the cost of the 401k vs the SIMPLE, the required safe harbor contributions for employees for both, the possibility of excluding employees under one or the other, and the expected benefit of Backdoor Roth possibilities under the 401k, among other things.

Pretty detailed stuff, given what's been presented.

So I've done my best to calculate the cost of a SIMPLE IRA vs a 401k over a 10 year time period. I took into account yearly increase in maintenance fees due to funds growing at 8%. It appears that over the 10 years, a 401k would cost about $42k more than a SIMPLE.

Now I have to decide whether it's worth being able to contribute (at today's limits) an extra $116k pre-tax into a 401k vs a SIMPLE. Will that make up for the $42k in extra cost? And then I need to determine whether the possibility of Roth contributions/conversions is worth trying to get my rentals into a different vehicle. So much to consider!

Statistics: Posted by Manny40 — Thu Jun 27, 2024 7:24 am — Replies 17 — Views 1019

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