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Contribution Limit SEP IRA – Savings That Score

By Guest Author On August 22, 2011 Under Success Secrets

There arenumerous greatbenefits to the SEP, including low administration costs and simple set-up, but possibly thelargest benefit is the opportunity to gather tax-deferred retirement savings swiftly, due to the large allowable contribution limit SEP IRA.  A SEP plan is suitable for the self-employedperson, and for small businesses that may not have the resources tooffer their staff with a more conventional retirement option .  Independent contractors, sole proprietors, S and C corporations, partnerships and LLCs, as well as small companies can all use the SEP to shelter retirement savings. For small company SEPs , theeligible employees are allowed to contribute up to $49,000 per year, or 25% of their annual compensation , whichever is less. The employer establishes the percentage and frequency of contribution, and could review annually to adjust or even eliminate the contribution. These contributions must be made in cash, rather than in stock. . An eligible employee is defined as being at least 21 years or older , having worked for the business for three of the past five years, and received at least$550 in compensation. You can make the contribution limit SEP IRA for the prior year up until the final tax filing deadline, including extensions. There is no provision in the SEP account for the catch-up contribution for older employees, nonetheless the higher contribution limit SEP IRA provides an opportunity to rapidly build retirement savings within the account . Often the employer selects a mutual fund firm to administer the SEP account , thus providing the participating employees with the opportunity to make the choice of investments within their own account and tailor their investments to their goals and investment philosophy. Because the SEP account is portable, in the event of an employment change it can be transferred to the new employer’s qualified retirement plan. Bigger contributions could mean a much more comfortable retirement, so look into the advantage of the contribution limit SEP IRA.

 

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