Retirement Account

A SEP IRA is established to help small business owners and self-employed individuals provide retirement benefits for themselves and their employees. It offers a straightforward and flexible way to save for retirement.

• SEP IRAs are funded entirely by employer contributions. Employers make contributions on behalf of themselves and eligible employees.
• Contributions are tax-deductible for the employer, reducing their taxable income for the year.

• Employers can establish a SEP IRA for themselves and their employees.
• Eligible employees include those who are at least 21 years old, have worked for the employer for at least three of the past five years, and have received at least $650 in compensation (as of 2023).

• The employer decides the annual contribution amount and can adjust it from year to year. Contributions must be proportional for each eligible employee.
• The same contribution percentage applies to the employer’s SEP IRA as well.

• The IRS sets annual contribution limits, which are typically higher than those of traditional IRAs.
• Contributions for eligible employees are limited to the lesser of 25% of compensation or $61,000 (as of 2023).

Contributions made to a SEP IRA are immediately vested, meaning employees have full ownership of the funds from the moment of contribution.

SEP IRAs offer a broad range of investment options, such as stocks, bonds, mutual funds, exchange-traded funds (ETFs), and more.

SEP IRAs can accept rollovers from other retirement accounts, such as traditional IRAs or former employer-sponsored plans.

There are no required minimum distributions (RMDs) during the account holder’s lifetime, allowing for tax-deferred growth for an extended period.

• SEP IRAs are easy to establish and maintain, with minimal administrative work and reporting requirements.
• Employers can typically set up SEP IRAs with financial institutions, such as banks or investment firms.