What High-Earning Freelancers Should Know about SEP IRA’s
A Simplified Employee Pension (SEP) IRA is an individual retirement account available to people who are self-employed, own their own business, or are employed by a company that offers this type of retirement plan. This type of retirement plan allows employees to contribute up to 25% of their net income, or $61,000 (whichever is less) each year.
The main benefit that a SEP IRA offers, is that it boasts high contribution limits compared to other retirement plans. This makes it a great option for business owners of any size who want to save for their future.
For self-employed people who operate as sole proprietors, a SEP IRA may be the most practical retirement savings option. This is because it is incredibly simple to setup and maintain and requires very little paperwork.
Employers with employees other than themselves can also benefit from a SEP IRA. Contributions to this type of retirement plan are tax-deductible, reducing the employer’s tax burden. Employees can also deduct their contributions on their personal income taxes, so it is a win-win situation.
In addition, employers have flexibility when it comes to contributions. They can choose to contribute between 0 to 25% of eligible employees’ wages and can decide to make contributions to certain employees and not others, as long as the same contribution percentage is made across the board.
In summary, a SEP IRA is a great option for self-employed people, employers with employees, or members of a partnership who want to save for their retirement. It offers flexibility and tax benefits to employers and employees alike.
Dan Rhoads can help ensure that your retirement plan can help set up for a bright future. Get in touch today to learn more. Call (484)460-3922.
Disclosures
The sources used to prepare this material are believed to be true, accurate and reliable, but are not guaranteed. This information is provided as general information and is not intended to be specific financial or tax guidance. Before you make any decisions regarding your personal financial situation, you should consult a financial or tax professional to discuss your individual circumstances and objectives. When you access a link you are leaving our website and assume total responsibility for your use of the website you are linking to. We make no representation as to the completeness or accuracy of information provided at this website. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, websites, information and programs made available through this website.
References
“Simplified Employee Pension Plan (SEP)” and sections therein, Internal Revenue Service website. Accessed 17 Jul 2023. https://www.irs.gov/retirement-plans/plan-sponsor/simplified-employee-pension-plan-sep
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