SIMPLE IRA Transfer

My annual trustee-to-trustee transfer of SIMPLE-IRA account accumulations has been successfully implemented. The transfer process went smoothly, although this year I received telephone calls from both investment institutions before the transfer procedure was put in motion.

Reviewing my motivation for making the transfers should be self explanatory once one tabulates the cost differentials between the two fiduciary companies managing the accounts.

My employer plan is invested in AIM mutual funds. I use the sole no-load fund offering, the money market fund, for accumulating salary deferral contributions. The expense ratio for this fund is 1.02%, and the cost per 1000 dollars (at 5% appreciation) comes to 5.16/1000. On a ten thousand dollar balance, this cost loading drains 51.60 dollars per year from investment returns. Over five years of accumulations, the cost drain would accumulate to 774.00 dollars. (If I were to choose a bond fund with AIM, I would sacrifice a 5.5% load on each investment and then endure a 5.66/1000 dollar expense drain on the residual invested balance.)

I transfer the SIMPLE balances to a Vanguard Traditional IRA. I allocate these funds into the Vanguard Inflation Protected Securities Fund. The annual expense ratio for this fund in 0.20%. The cost per 1000 dollars (at 5% appreciation) comes to 1.02/1000. On a ten thousand dollar balance, this cost loading drains 10.20 dollars per year from investment returns. Over five years of accumulations. the cost drain would accumulate to 153.00 dollars.

The differential in cost loadings continuously compounds over the lifetime holding period on the investment.