SEP IRA Employee – Building Retirement Wealth
If the small business you work for establishes a SEP plan – the Simplified Employee Pension – you, as a SEP IRA employee have an opportunity to be part of asolid retirement program that benefits everyone. For the employer, there is a substantiallylower expense to establish the account , tax advantages, and the reporting and record keeping requirements are simplified . For the SEP IRA employee, there aregreater contribution limits that present an opportunity to accumulatefar more retirement savings, and asimple fundingmethod where contributions to the plan are funded through pre-tax salary reductions. The employer decides on the frequency and amount of the contributions, and ispermitted toevaluate andalter the amount, or even suspend them. Contributions for every qualified SEP IRA employee can be up to 25% of annual compensation, or $49,000 per year, whichever is lower . The employer establishes the accounts and funds the contributions on behalf of the employees. Once the money has been contributed it becomescompletely vested. This feature makes the SEP completely portable, so if an employee changesjobs, there is the ability toswitch the account balance to the new employer’s sponsored retirement plan or to roll themoney into another type of individual retirement account. SEP accounts are subject to many of the same rules governing traditional IRAs when it comes to withdrawals and varieties of permitted investments. Withdrawals from the account canstart as early as when the account owner becomes 59 ½ years old, however earlier distributions will trigger a 10% penalty in addition to the regular tax obligation. Withdrawals from the account must start by the time the account owner is 70 ½ years old . Sometimes theorganization willpick a mutual fund firm to administer the plan , which allows the SEP IRA employee to make their own investment decisions. SEP plans make it possible for smaller companies to offer solid retirement benefits to employees.
Tags:sep ira,sep ira employee
Tags: 
Loading ...