Under a SEP strategy the company produces an IRA represent each qualified employee, therefore the name SEP-IRA. Any cash that enters into a SEP immediately comes from the worker. The staff member has the right to take his SEP IRA account money with him whenever he stops working for the company.
Any size organization can develop a SEP, nevertheless the SEP retirement technique is made usage of generally by the self-employed and the little service with couple of personnel members. The SEP IRA standards determine that if the company contributes for one personnel member, (i.e., the owner), then service requires to contribute proportionately for all of the personnel members.
2. Has actually not reached age 21 throughout the year for which contributions are made.
3. Gotten less than $450 in settlement (topic to cost-of-living adjustments) throughout the year.
SEP IRA contributions to each employee for 2004 can not surpass the lower of $41,000 or 25% of invest for W2 receivers (20% of earnings for sole owners). The SEP IRA contribution restriction increases to $42,000 for 2005, and goes through cost-of-living modifications for later years. SEP-IRA standards do not offer additional catch-up contributions for those 50 years old or over.
A growing variety of self-employed individuals with no employee are deserting the SEP-IRA for a more current sort of retirement strategy called the Solo 401(k) or Self-Employed 401(k). The 2 primary factors for the switch are 1) they can typically contribute a lot more to a Solo 401(k) than they can under a SEP IRA, and 2) Loans are allowed under a Solo 401(k), whereas loans are prohibited under a SEP-IRA.
Example: Henry, age 52, a real estate agent got $60,000 in payment from self-employment revenues in 2004. For 2004, he may contribute an optimum of $27,152 in a Solo 401(k) versus an optimum of $11,152 under a SEP IRA.
The Solo 401(k) does not work for business with employees. If your company prepares to utilize employees or has a handful of staff members, the SEP IRA may be your finest alternative as a retirement method that is easy and cost-effective to run.

Any size business can develop a SEP, nevertheless the SEP retirement strategy is made usage of mainly by the self-employed and the little service with couple of workers. The SEP IRA standards determine that if the business contributes for one personnel member, (i.e., the owner), then the company requires to contribute proportionately for all of the personnel members.

Any size organization can develop a SEP, nevertheless the SEP retirement method is made usage of generally by the self-employed and the little company with couple of personnel members. The SEP IRA standards determine that if the organization contributes for one personnel member, (i.e., the owner), then company requires to contribute proportionately for all of the personnel members. Under a SEP technique the company develops an IRA account for each qualified personnel member, thus the name SEP-IRA. Any size business can develop a SEP, nevertheless the SEP retirement strategy is made usage of primarily by the self-employed and the little service with couple of staff members. The SEP IRA standards determine that if the business contributes for one personnel member, (i.e., the owner), then the company requires to contribute proportionately for all of the personnel members.