What is an IRA? It is a savings account for retirement, sheltering savings, investments and earnings in either a tax-deferred or tax-free manner. It is the actual account the investments are held in. Preparing for retirement anticipates the circumstances that you might encounter . If we could see into our future, it would be simple to be precise in knowing what to do. But we can’t know things like what our lifespan will be, or if our personal life situation will alter drastically . When getting ready for retirement, we need to protect our long-term assets. Saving during our employment years should help us be ready for a stress-free retirement when our Individual Retirement Plans secure that future. In the current economic climate, downsizing could cost some jobs. You could have an injury or disability that could prevent you from continuing to work. The life expectancy age continues to rise for both men and women, so being unprepared could mean you may outlive your savings. Inflation risk can erode financial returns on those savings. Often there are added health problems as we grow older , so there may be more medical expenses to cover . And you may have unanticipated dependents, disabled or unemployed grown children or grandchildren, to help support , even in your retirement years. Life and what’s ahead is full of suprises , so we need to plan and be disciplined about the plan.Â What is an IRA? It is an account designed to help individuals get ready for retirement. A major aspect of retirement planning is expecting all these financial possibilities , and making appropriate moves now to reach our goals. An Individual Retirement Plan is an excellent tool in your planning . A self-directed Individual Retirement Plan, either a traditional IRA or a Roth IRA, is your investment account to make it happen . Contributing to individual retirement plans in a consistent manner helps you grow your retirement wealth.Â A self-directed Individual Retirement Plan allows you to diversify investment choices in a safe, growth-oriented manner.Â Self-directed Individual Retirement Plans give you additional investment options that may be pivotal in reaching your goals. Saving and investing wisely now can bring great security that will make your retirement golden.
AnÂ IRA SEP is the remarkably easy and smart plan designed to benefit self-employed people and small business owners who want to prepare now for their retirement years. Sole proprietorships, partnerships, S and C corporations and LLCs can qualify and can take advantage of the IRA SEP. The plan has a broad appeal since it is inexpensive to set-up and administer, flexible in that it allows rollovers, and has a greater than expected and discretionary contribution policy. AnÂ IRA SEP plan could be established by a company owner with employees or by a single-person company . Contributions are paid directly to an individual retirement account set-up for the benefit of the business owner and each eligible employee. An eligible employee must be at least 21 years old, have worked for the company for at minimum three of the last five years, and received $550 in compensation from the employer for the year. Contributions to an IRA SEP are normally 100% tax deductible, and the investment earnings in anÂ IRA SEP grow tax-deferred. Withdrawals , allowed after age 59 Â½ years old, are taxed as ordinary income. Any withdrawals before that age may trigger a 10% IRS penalty in addition to the normal income taxes. Withdrawals must start by age 70 Â½ years old. The annual contributions an employer can fund on behalf of the employee to the IRA SEP cannot exceed the lesser of 25% of compensation or $49,000. These same contribution caps will apply to the IRA SEP of a self-employed person, and all contributions are made in cash, not stock. The plan isset up by adopting a SEP agreement and qualified employees opening SEP IRAs. A formal written agreement is drawn up and each qualified employee receives a written copy. TheÂ IRA SEP can be established at any point during the tax year up until the due date of the employer’s tax return
TheÂ IRA SEP can be set-up at any timeduring the tax year up until the due date of the employer’s tax return. The administrative costs are low, and for the self-employed person there are normally no administrative costs at all. One requirement of the IRA SEP is that all employees must receive equal benefits. Most employers decide on a large mutual fund company to handle the employee’sÂ IRA SEP. This allows the employees to make investment choices for their own plans, and frees the employer from having to make those decisions. The plan functions in the same way as a pension plan but on a streamlined scale and with no filing required . The IRA SEP can also be rolled over into other kinds of IRAs if employment changes, so it is very portable. It’s an excellent choice for the small company wanting to offer a pension plan, but lacking the resources to establish a conventional kind of plan. The IRA SEP is easy to understand and simple to manage .It was structured to benefit the self-employed and small company owners, and is also a popular choice for LLCs, partnerships, S and C Corporations, and sole proprietorships. Contribution limits are generous in theÂ IRA SEP, and are generally 100% tax deductible. Investment earnings in the IRA grow tax-deferred. Withdrawals can start as soon as age 59 Â½ years old, but earlier withdrawal incurrs a 10% IRS penalty in addition to income taxes on the withdrawal The distributions must begin no later than age 70 Â½ years of age. An IRA SEP is a good alternative for owners of a small company who would like to help employees prepare for retirement, but are unable to manage a more conventional retirement plan. Since contributions can be up to 25% of the employee’s compensation, there is the opportunity to rapidly grow a retirement nest egg with theÂ IRA SEP.
TheÂ SEP retirement plan is a good option for small businesses and the self-employed, and can provide an excellent source of retirement income. Sole proprietorships, partnerships, S and C corporations and LLCs could all benefit from this plan . Many businesses are eligible for a tax credit of up to $500 per year for each of the first three years covering the expense of starting the plan. The SEP retirement plan is simple to set up , and once in place is simple to operate. Small businesses appreciate the ability to attract a better quality of employee to their job openings by being able to offer the additional incentive of the SEP retirement plan benefits. To be qualified for theÂ SEP retirementplan, the employee needs to be 21 years old, have worked for the employer for three of the last five years and been compensated with at least $550 in wages. Often employers decide on a mutual fund company to administer the account. Each employee can then choose their individual investments from the provided funds, relieving the employer from needing to make those decisions. Contributions are not required, so the employer may decide on the level and frequency of those contributions based on the company’s profitability. Having a SEP retirement plan is a great alternative for smaller companies who might not have the resources to present their employees a more conventional option. The Simplified Employee Pension Plan, or SEP retirement plan makes that available , at a significantly smaller cost and with less reporting rules . There are good benefits for both the employer and the employees. The SEP retirement account allows for much higher contributions, so eligible participants may rapidly build their retirement savings in a tax-sheltered environment. The benefits are fully vested immediately when they are contributed, making theÂ SEP retirement account portable. Workers who change employers are able to roll their Sep balances into another IRA, or may choose to transfer them to another employer’s qualified retirement program