Sep Retirement Plan – Growing Savings for Employees
For a simple , inexpensive retirement plan, look into the Simplified Employee Pension – known as the SEP Retirement Plan. A Sep retirement plan allows the employer to put aside money for himself and for the employees of his business by directly contributing to traditional individual retirement plans set up for everyone, and allowing a contribution of up to 25% of each employees pay to the plan. The contributions to the Sep retirement plan are tax-deductible, and the company owes no taxes on earnings on the investments within the plans. Flexibility of the SEP means the employer is not required to fund contributions every year, so the employer could decide on the percentage on an annual basis and even choose to hiatus the plan if profits are lagging or he simply cannot make contributions for a given amount of time. Administrative costs of the Sep retirement plan are small , and usually there are no forms that must be filed with the government. Sole proprietors, partnerships, and corporations can set up SEPs. Eligible employees for the plan will be at least 21 years old and have worked for the business for three of the last five years. A SEP can be set up as late as the due date, including extensions, for the year in which you want to establish the plan. The employer should select the financial institution that will administer the SEP: receiving and investing the contributions, and providing each SEP participant with a notice of the employer’s annual contributions and the year-end value of his/her SEP IRA. Distributions can begin at age 59 ½ years old and are mandated to start by age 70 ½ years old. While the employee cannot take loans from the Sep account, it is allowable to do a tax-free rollover into another SEP account, a traditional IRA, or another employer’s IRS-approved retirement plan. Selecting a Sep retirement plan is easy and smart for the small business
Choosing Security with the Sep Retirement Plan
Choosing a trustee for the Sep retirement plan is a critical decision. The company that holds the account for the business will be responsible for making investments on behalf of the participants and for providing paperwork and notifications to the employees regarding their account. The trustee for a Sep retirement plan is usually a bank, brokerage house, or other IRS-approved financial institution. The legal document for the plan is Form 5305-SEP, which the employer completes and retains as the reference describing the plan’s terms. A copy is provided to the participating members . The business owner is responsible for forwarding the employee contributions to the trustee, and keeping the trustee enlightened on all status changes among the employees . For instance , new hires might be added to the Sep retirement plan provided they meet qualification requirements. To qualify for the Sep retirement plan, the employee must be at least 21 years old and have worked for the company three of the past five years. Contribution limits per employee are capped at the lower of $49,000 annually or 25% of the worker’s compensation. The business owner is not required to make contributions every year. It’s up to the employer to decide on the percentage if a contribution is to be made, but contributions must be uniform for all participating employees. Money from a Sep retirement plan can be withdrawn at any time, but is subject to income tax for the year in which the employee takes a distribution . Withdrawing money from the Sep prior to age 59 ½ years old can subject the distribution to an additional 10% penalty tax. Withdrawals from the SEP must begin when the participant reaches age 70 ½ years old. Participants cannot take loans from their Sep retirement plan, but are allowed to roll it over tax-free into another SEP IRA, another traditional IRA, or another employer’s qualified retirement plan.
You Need Equities in Your Retirement Portfolio
A lot of investors believe that once they reach their retirement years, they need to abandon equities and other investments that offer growth potential. Their reasoning: too much risk. In this brief article, we examine why you need to have equities in your retirement portfolio.
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Individual retirement account or arrangement is a financial device to the retirees that provides tax advantages for retirement savings.
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