Who Told You About the SEP Roth IRA?

There has been some confusing talklately about the SEP Roth IRA. Wishful thinking, as no such retirement account exists! The Roth IRAoffers tax-sheltered earnings, and since the contributions are taxed on funding, those earnings and the qualified withdrawals are tax-free. If the Roth account has been established for five or more years, the owner may start taking withdrawals as soon  as age 59 ½ with nofurther tax obligation . If the account is a self-directed Roth, there are far more opportunities for investment options . The investorcould possibly opt for precious metals or real estate instead of the more conventional stocks, bonds, and mutual funds. The SEP, or Simplified Employee Pension, was developed for the benefit of small firms, self employed individuals, and is often utilized by LLCs, sole proprietorships, S and C corporations and partnerships. It’s a sound choice for those who may not have the resources for a more standard retirement plan and is less pricey to set up with low administration expenditures and streamlined reporting and record keeping specifications. The employer makes contributions to the SEP for the employees after deciding on the contribution percentage. That employer can alter or suspend contributions, but must apply the percentage equally to the accounts of all eligible employees. The SEP contribution limit is generous, up to 25% of the eligible employee’s annual compensation. The SEP is essentially a group of traditional individual retirement accounts, managed for the employees and subject to many of the rules of a traditional IRA. The SEP Roth IRA does not exist. An employee participating in a SEP plan could also have an individual Roth IRA and contribute to it outside of the employer plan. The contributions to the SEP plan are fully vested as soon as they are made , so those balances are portable and can be rolled into another IRA or transferred to a new employer’s sponsored plan in the event of a employment change. While there is no SEP Roth IRA account offered, both the SEP account and the Roth IRA are valid and solid opportunities to save and prepare for retirement.