Self-Employed IRA: Look No Further than a SEP

Most employer retirement plans take the needs of both the employee and the employer into consideration. But what if the employee and employer are one and the same? Self-employed individuals may wonder about their retirement options, and, as with any self-directed investor, may want to put an alternative investment strategy to work for their futures instead of relying on Wall Street. Although every retirement investor may work toward different goals, a SEP IRA can be a suitable self-employed IRA option for those looking for flexibility and higher contribution limits.

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The IRS seems to have kept self-employed individuals in mind when formulating the rules and benefits of the SEP IRA. Self-employed business owners may defer SEP IRA contributions from their income to enjoy a near-term tax benefit. To generate retirement income, SEP IRA holders can invest their contributions in alternative, tax-deferred investments. Those with Traditional IRAs or other pre-tax employer plans may also transfer or roll their accounts into a SEP IRA. This can further boost one’s earning potential and allowing the holder to manage his or her retirement investments in a more consolidated fashion.

SEP IRA Contributions

The SEP IRA offers significantly higher contribution limits than other individual plans. Other account holders must also make their annual contributions on or before their tax filing deadlines. SEP IRA holders may contribute up until their business tax filing deadlines, which may lie beyond the typical mid-April date.

A few stipulations do exist for SEP contributions:

  • Employer contributions to the SEP IRAs of one’s employees must occur in an equal percentage of compensation. For instance, if you elect to contribute 10% of compensation, all eligible employees with SEP IRAs must receive 10% of their respective incomes.
  • Exact annual contribution limits will vary by the holder and can be tricky to determine. Consider reaching out to an accountant or tax professional for assistance with the calculation.
  • SEP plans do not permit employee elective deferrals and catch-up contributions. Only employer contributions are allowed in these instances.

When you open a SEP IRA with a self-directed IRA custodian, you can direct your account to invest in assets that lie outside of the stock market, such as real estate, precious metals, private loans, and more. To understand more about your retirement options as a self-employed individual, feel free to give New Direction Trust Company a call at 877-742-1270 or send us a message through the Client Portal.

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