Many individuals especially business owners want to retire financially secured. This is the reason why aside from saving through their personal bank accounts, they still invest in a retirement fund. There are actually several plans to choose from -- IRA (Individual Retirement Account), Roth IRA, 401(k), or SEP IRA. Let us focus on the last option.
A Simplified Employee Pension Individual Retirement Account or SEP IRA is a retirement plan designed for self-employed US citizens. This plan allows them to save up to 20% of of their yearly wages. For example, a self-employed individual earning around $60,000 per annum can contribute 20% of his wages or $12,000 towards his SEP IRA. If he has an employee, he can deposit as much as 25% of their wages to their own IRA accounts.
A Simplified Employee Pension Individual Retirement Account or SEP IRA is a retirement plan designed for self-employed US citizens. This plan allows them to save up to 20% of of their yearly wages. For example, a self-employed individual earning around $60,000 per annum can contribute 20% of his wages or $12,000 towards his SEP IRA. If he has an employee, he can deposit as much as 25% of their wages to their own IRA accounts.
The SEP IRA is always being compared with the 401(k), another retirement plan that has almost the same contribution limits and features. The former still has several advantages that cannot be found in the latter and vice versa. One important factor to be taken into consideration is that you should be sure that your business will earn the desired revenues during the given year.
For the maximization of the returns and saving more and more for your future, it becomes rather important to invest as much as you can. By doing this, it becomes inevitable for your retirement investments to soar high on returns. These returns can be claimed whenever you need them.
The best time to make qualified withdrawals is when you reach the age of 59 years and 6 months. This way you can avoid penalties aside from the regular tax imposed on your savings. In a traditional IRA, the contributions are capped off at $5,000 while in the 401 k plan, this contribution is between $15,000 and $16,000. This is much lower than the limit for the SEP IRA contributions.
So, there is nothing but positive news when one thinks of investing in the simplified employee pension individual retirement account or the SEP IRA. It is a great investment mechanism for the future and a self-employed individual should definitely consider getting one. Visiting www.sepirahq.com will help you answer more of your questions regarding this.
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