A couple of decades ago, most people didn’t bother with Simplified Employee Pension or SEP IRAs, which are investment retirement accounts for the self-employed. Employment opportunities were plentiful and employees would normally remain with a larger firm long enough to earn retirement pensions or benefits from their employer.
Today, on the other hand, over 15% of the country’s workforce is self-employed or working in temporary positions. This leads most people to believe that retirement planning is difficult, but is it really?
Self-Employed Retirement Planning: Learning to Create Your Own Nest-Egg
If you own a small business with few employees, or you’re self-employed, you probably already know that your retirement is heavily dependent on how well you save your own money. After all, without a pension or a company-sponsored retirement plan, you’re pretty much on your own.
There’s another disadvantage to being a business owner or self-employed professional – without a 401(k) or traditional IRA, you can’t enjoy the tax advantages on your savings. That’s where the SEP IRA comes in, as a brilliant retirement savings opportunity for the self-employed, freelancers and business owners with one or more employee.
All about SEP IRA
Highlights of a SEP IRA
- Employer-sponsored and available to any business
- Excellent for freelancers and self-employed
- Tax-deductible contributions for employee
- Tax-deferred growth
- Much higher contribution limits than personal IRAs
- Contribution percentages can be changed on an annual basis
- Employees are 100% vested
- Contributions to traditional or Roth IRAs are still allowed
- Lower administrative costs
- Readily available through a number of online investment firms