The Future


What is a “SEP IRA”?

A SEP IRA is a Simplified Employee Pension plan that allows employees and small business owners the ability to save for their retirement. It allows employers to contribute into an employee’s SEP IRA account up to 25% of his annual earnings. The employee may also contribute to this account, and all contributions are tax deductible. Sole proprietors, partnerships, and corporations—including S corporations—can set up SEPs for their employees. You cannot take out loans against your balance. If you withdraw money from the account as income prior to retirement, you will pay a 10% penalty on this money. When you retire, you may make withdrawals from the account, and pay tax on this amount as ordinary income at that time. You may move a SEP into another IRA any time you like.


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