A SEP IRA, or simplified employee pension plan, is a type of retirement account. After opening one, you may choose how much to contribute, up to 25% of annual pay. You can also elect to contribute some for your staff if that’s important. If you’d like to open one for them, your contribution has to be the same for everyone. By moving your funds to a self-directed account, you can choose where they’re invested, too.
What Is a SEP IRA
This is a particular type of IRA, designed to be as simple as possible. There’s one major rule when it comes to having one, and that’s the contribution limits. If you open one, you can’t contribute more than 25% of your annual pay to it. Even if you keep it under that, you can’t put in more than $61,000 a year.
IRAs benefit investors by reducing how much they owe in taxes. Even though you have to pay when contributing, you don’t have to when withdrawing. So, anything you’ve gained from the investment will be tax-free. That’s enough of a benefit to entice most investors. Since you won’t pay as much in taxes, your overall account will be larger.
Using a self-directed account adds more benefits, too. Instead of relying on an account manager, you get to choose where you’ll invest. So, it’s much more versatile than other account types, usually.
Pay attention to the yearly updates regarding contribution limits, too. Sometimes, they change how much you can put into them in a given year.