As an employer or an employee, it’s easy to see the benefits of a SEP IRA plan . For the employer, it’s a simple way to set up a retirement savings plan for yourself and your employees. As the employee, the larger SEP IRA contributions, as compared to a traditional IRA, allow you to build retirement savings at a fast pace . But that doesn’t mean you will always want to keep your money in the employer- selected SEP IRA. If you leave your career , you might decide to do aÂ SEP IRA rollover to a privately held IRA plan. You could get a broader range of investment choices with a self-directed traditional IRA. The transfer process is simple . To begin theÂ SEP IRA rollover, open a traditional IRA. If you have selected the self-directed option, you will need to choose the custodial company to house the account. It’s an important decision, so select a custodian who offers a variety of investment options you are happy with, and learn what charges to expect for transactions, wire charges, and account maintenance. Â Once the account has been set-up , make a rollover request. Your SEP IRA provider can furnish you with the necessary forms . You then designate the assets you intend to move, and instruct where they are going. The new custodian may also have forms that you need to fill out . The easiest transfer will be trustee-to-trustee, transferring the assets directly. If instead, you receive a check, you must deposit the funds into the new account within 60 days of the date on the check . Failure to do so will reclassify theÂ SEP IRA rollover as a distribution, and you will be subject to taxes and fines. Once the transfer is complete, you will still need to report it on your taxes. You will receive a Form 1099R from the SEP provider at the end of the year. Simple ! You’ve successfully completed theÂ SEP IRA rollover.
If you have a SEP IRA plan, you might want to learn about theÂ SEP IRA rollover. Maybe you have another account â€“ for example , a Traditional IRA, and you’d like to complete aÂ SEP IRA rollover. There are two different ways you can move funds between IRA accounts. If you select an indirect transfer, you will get a check from your current IRA plan, but not in the full transfer amount. You will receive approximately 80% of the money via check. The plan holds back the remaining 20% as security for taxes that you may incur if you do not meet the Internal Revenue Service transfer rules , stating that you have only 60 days to place the funds in the SEP IRA account. Once the funds are placed, the 20% mandatorily held can be released. Designating a directÂ SEP IRA rollover is easier , and a cleaner transaction. You first set up the SEP IRA, then notify the old IRA account to transfer the assets . The transfer takes place between the two accounts directly, so you don’t have to do anything further. Just check on the transfer to confirm it is complete . If you are considering a SEP IRA rollover on an established Roth IRA, rethink reconsider your choice since there are tax implications involved. The Roth IRA is funded with money that has already been taxed, so that it can be distributed from the account tax-free. Transferring the money from the Roth IRA to a SEP IRA will mean that the funds will be taxed again, a second time, when withdrawn, because that money has been removed from a specific IRA account that’s established as a tax-deferred plan. Rather than performing the Roth to SEP transfer, you can establish a SEP IRA for future contributions and leave the existing monies in your Roth where they can grow tax-free until you withdraw them , tax free, at retirement. If you qualify for a SEP IRA, there are special advantages you should be aware of . With a traditional IRA rollover account, you have limitations on the amount you can contribute from the SEP IRA rollover account each year . The current amount is $5000. But if you have SEP IRA accounts you are able to contribute up to 25% of your annual income, with a cap of $49,000 yearly , without having to pay taxes. If you qualify for aÂ SEP IRA rollover from a traditional IRA account, this might be a good opportunity to accelerate your retirement goals.
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If your career has had several moves , you might find that you have multiple IRA accountsâ€¦the employer sponsored SEP IRA, and perhaps a Traditional or Roth IRA as well. People in this situation often decide to consolidate the multiple accounts into one IRA plan that they can control in a better manner .Â This is the time when you have to choose which IRA is best for you and for meeting retirement goals. Whatever your choice is, it is wise to use a direct rollover to transfer your money. Let’s say you are doing aÂ SEP IRA rollover, moving funds from a traditional IRA into the employer-sponsored SEP IRA. You’ve chosen this because contributions limits are higher in the SEP plan, letting you rapidly save for your retirement years. To execute theÂ SEP IRA rollover, once the SEP account is open you notify the provider for your other IRA. A direct transfer is best, and easiest. The two trustees execute the fund transfer directly, although you will have forms to fill out to start the process. An indirect transfer means you would receive a check for roughly 80% of the funds , with the remaining 20% being held out for taxes that you could incur if you do not meet the IRA transfer rules. The regulation states that you have 60 days from check date to deposit the money in the SEP account. Failure to do so has tax and penalty fine implications. Once the transfer has been completed, the 20% mandatory withholding will be released. For aÂ SEP IRA rollover, the direct transfer is always an easier choice. It’s simple and clean, and eliminates the possible tax issue an indirect transfer might present. If your rollover plan involves a Roth IRA, consider your choices carefully. Because the Roth is funded with money on which the tax has already been taken, rolling it into a tax-deferred plan alters the account status and tax advantage. You could end up paying taxes again . TheÂ SEP IRA rollover is simple to complete if you follow the steps.