Prepare for Your Future with a SEP Traditional IRA
The SEP traditional IRA hasa lot of of the qualities of a traditional IRA and is subject to theidentical rules on investment choices and distributions. The distinction for the SEP traditional IRA is most evident in the significantly larger contribution limit it allows . This plan was developed to benefit the self-employed person and small companies who might not have the resources to provide their employees with a more conventional retirementplan. In the small business plan, eachperson has a traditional IRA and the plans are grouped together as aSEP traditional IRA account into which the employer funds the contributions. Usually the employer will open the plans for all eligible employees. The employer funds the SEP accounts through a pre-tax salary reduction, and contribution percentage is consistent for all eligible employees. The greater allowed contribution limit, up to 25% of yearly compensation, allows the employees to accumulatemore savings for retirement at a quicker pace. This is particularly advantageous forindividuals who may have gotten a late start saving andgetting ready for their retirement years. The retirement benefits in the SEP are fully vested as soon as they are contributed, making the account portable. Employees who change employers can roll their SEP funds intoa different IRA or transfer them to a retirement plan sponsored by the new employer. Typically small businesses select a mutual funds company to manage the SEP account, allowing each employee to make their own investment choices based on theirobjectives and risk-tolerance. There is alower set-up cost for the employer with a SEP, and the reporting and record-keeping demands are simplified . Like a traditional IRA, distributions from the SEP traditional IRA canbegin as early as age 59 ½, although there is a 10% penalty for earlier withdrawals in addition to standard tax obligation. Distributions must commence no later than age 70 ½ years old. The SEP traditional IRA offers a stable savings opportunity.