What Are The Benefits Of A SEP IRA?

Not sure if a SEP IRA is right for your company? That’s understandable as retirement plans can be confusing, especially since there are a number of ways a company can start a retirement plan for their business.  Each type of plan has it’s particular way of being set up and has it’s benefits. Some of those benefits may be great for some, while others may not get the most out of a particular retirement plan. If you are a self-employed individual, or a business owner with a small number of employees, you should definitely look in to getting a SEP IRA. Here are some reasons why:

SEP IRA – Size Doesn’t Matter

Sure there are some SEP IRA rules that you must meet when setting up a  SEP, but one of the great things about a SEP is that it is available to any business no matter the size of the company. This is especially beneficial to small business owners that don’t have a lot of employees yet they want to offer a retirement plan that makes sense.

Easy to Setup

A SEP IRA is very easy to setup. You do not need to file a lot of paperwork to open this particular type of retirement plan. Also, a SEP agreement encompasses all of your employees under you. This makes making contributions easier than having to contend with a number of individual plans.

Low Costs

Compared to other retirement plans, a SEP has smaller administrative and maintenance cost. Instead of paying high fees like you do with other plans, in a SEP, you can channel the money to your contributions for an improved investment.

SEP IRA Contributions are not compulsory

A SEP owner is not required to make contributions every year. If he does decide to make a contribution, the amount to be given to the SEP is to the employer’s description. This flexibility can be advantageous if the business is not going very well in that period of time. It also has a lot of flexibility as to what can be contributed. Say if your company has a slow year, you can reduce the amount that is contributed and when you have a good year you can increase it.

Contribution Limits

Out of all the retirement plans for small businesses and self-employed, a SEP has one of the highest contribution limits available. The limit would either be $49,000 or 25% of an individual’s salary, whichever is lower. So if your company is in a progressive state, this could translate to bigger contributions and retirement funds under the SEP also grow faster.

What Are The Benefits Of A SEP IRA?
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Originally posted 2017-02-02 06:16:37.