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Simplified Employee Pensions (SEPs) and SIMPLE Plans

Introduction

If you are self-employed and looking for true simplicity, look no further. A Simplified Employee Pension (SEP) is an employer retirement plan that uses IRAs as the funding vehicle. In 2019, you can contribute up to $56,000 ($55,000in 2018), or 25% of compensation, whichever is less. The actual formula limits your contribution to 20% of your net self-employment income. You can even make your regular IRA contribution to your SEP, in addition to your regular SEP contribution.

SUGGESTION: Your contribution can vary from year to year; you can even skip contributions indefinitely. While this is probably not in your best interest, you also don't have to be bothered with complicated plan documents or annual filing requirements.

 

IMPORTANT NOTE: As in a regular IRA, you can't borrow from a SEP, nor can you use the assets as collateral for a loan. In addition, the rules against putting collectibles in your IRA also apply to SEPs.

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1 Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC. Infinex and the bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of, nor guaranteed or insured by, any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.


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