In the past, many small business owners were unable to have a profit-sharing or pension plan for their workers , or to attract excellent employees to their business . TheÂ SEP IRA account has changed all that, and made it easy to set up and administer at a very small cost to the business. A SEP IRA account is another version of the original IRA designed for individuals, performing in the same way for the business owner. The account operates as a simplified pension plan, and can be rolled over into other types of IRA’s if employment changes or the owner becomes eligible for an alternate plan. A feature of the SEP IRA account is the simplicity, and it combines that with flexibility and portability, making it an excellent choice for self-employed people and small companies . Administrative costs are low. A SEP plan can be set up for the year as late as the due date, including extensions, of the business’s income tax return for that year. In a small company , benefits for one must be offered to all eligible employees. The business owner sets the contribution limit, up to 25% of the employee’s total income, and that portion of compensation is tax deductable. The self-employed can designate as much as 20% of earnings, with the limit on contribution calculated on the self-employed worker tax return. Disbursements from aÂ SEP IRA account can start as soon as 59 Â½ years old, and are mandated to begin by age 70 Â½ years old. Any employee may terminate theÂ SEP IRA account at any time by notifying their employer. The account belongs to, and is controlled by the employee, and the employer sends the contributions to the financial institution where the SEP IRA account is maintained. Each employee makes investment choices within his own plan. Eligible employees must be 21 years old, have worked for the company three of the past five years, earning at least $550 in wages. Contributions to theÂ SEP IRA accountare normally completely tax deductible.
What is an IRA? An IRA is an Individual Retirement Account, and provides the account owner with either a tax-deferred or tax-free way of saving toward retirement. There are several different kinds of IRAs, and deciding which is ideal for a person depends on their particular situation and retirement needs . An IRA is simply a savings plan with certain restrictions. In a Traditional IRA, the account owner defers paying taxes on the contributions and earnings from these savings until the money is withdrawn . Funds cannot be distributed until the owner reaches age 59 Â½ years old, and any early withdrawal prior to that is subject to a tax penalty. Every individual retirement account has its own tax implications and standards for eligibility. In a Roth IRA, contributions to the account are made with after-tax money so all transactions within the account has no tax repercussions for the owner. Distributions from the Roth IRA are tax free, as long as the owner has reached age 59 Â½ and the account has been seasoned for five years. Rather than giving a tax break for IRA contributions, the Roth IRA provides the advantage at distribution , and helps the investment profits grow tax free in the account .Â What is an IRA? It’s JUST the account that holds the investments. So choosing a Traditional IRA, a Roth IRA, a SEP IRA or any other type of individual retirement account will depend on the investor and their retirement goals . Many people choose either a Roth or Traditional IRA, but opt for the self-directed option. A self-directed IRA puts the most control in the hands of the account owner, who makes the critical decisions for the plan. With a self-directed IRA, the owner decides on the custodian firm to hold the account. Frequently they decide on a custodian with experience in alternative investments, providing non-traditional choices beyond the conventional stocks, bonds and mutual funds to include tax liens, real estate and real estate notes, even gold and silver . The custodian firm makes investments at the direction of the account owner, and on the owner’s behalf.
What is an IRA? It’s simply the individual retirement account that holds investments. So choosing a Traditional IRA, a Roth IRA, a SEP IRA or any other kind of individual retirement account will be determined by the investor and their retirement goals . Many people select either a Roth or Traditional IRA, but favor the self-directed option. A self-directed IRA puts the ultimate control in the hands of the account owner, who makes the critical decisions for the account . With a self-directed IRA, the owner decides on the custodian firm to house the account . Often they choose a custodian with experience in alternative investments, providing non-traditional opportunities beyond the conventional stocks, bonds and mutual funds that include tax liens, real estate and real estate notes, even precious metals . The custodian firm makes investments as instructed by the account owner, and on the owner’s behalf. Depending on the kind of IRA, there are qualifying factors and contribution caps . Regulations differ on approved investments, but a self-directed IRA allows for greater options. The custodial firm holding the IRA can decide on the menu of investment products available , so the choice of a custodian is important and often based on the opportunities offered. Individual Retirement Accounts were announced in 1974 with the enactment of the Employee Retirement Income Security Act. In 1981, the Economic Recovery Tax Act made it possible for all taxpayers under the age of 70 Â½ to contribute to an IRA, regardless of their coverage under an employment-based pension plan.Â What is an IRA? It is just a retirement plan account providing retirement savings advantages to the American taxpayer. There are a lot of different kinds of accounts in the world of IRAs. They offer tax-deferred or tax-free savings for the account owner, and help grow retirement wealth .Â What is an IRA? It is basically an account that provides huge tax benefits when used to save money for retirement. Choose wisely
TheÂ IRA SEP is a newer version of the original individual retirement account, but altered to provide those same functions for business owners and for the self-employed. It is an attractive compromise for any small employer who would like to provide a retirement or pension plan, but does not have the resources to establish a more conventional kind of plan. SEP stand for Simplified Employee Pension and true to its name the IRA SEP is simple to set-up and to manage , at a very low cost. To be eligible for the plan, an employee must be at least 21 years old , have worked for the employer for three of the past five years and been paid at least $550 in compensation. Contribution limits are very generous, up to 25% of the employee’s compensation, but there are no contribution obligations. An employer can change the amount and the frequency of contribution depending on the business profitability every year. The contributions could be put on hiatus if dictated by economic or business conditions. TheÂ IRA SEP does not require complicated reporting to the IRS on annual returns, so administration is streamlined. Most employers select a mutual fund company to fund their employee’s accounts. This allows the individual employees to determine their own investment choices. The plan is portable, and can be rolled over into another qualified retirement plan should employment change. Disbursements from the IRA SEP can start as early as age 59 Â½ years old, although there is a 10% IRS penalty incurred for earlier withdrawals . And mandatory distributions start no later than age 70 Â½ years old. Contributions to the IRA SEP are tax deductible and earnings in the account grow tax-deferred. Because the high contribution limit allows for up to 25% of the employee yearly compensation, there is an excellent opportunity to quickly build retirement savings in the account. TheÂ IRA SEP provides solid benefits for employers, employees and for the self-employed, and is well worth considering.