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Low Cost Account – the SEP Retirement Plan

By Guest Author On January 26, 2011 Under Success Secrets

Having a SEP retirement plan is a great alternative for smaller businesses who may not have the resources to provide their employees a more conventional option. The Simplified Employee Pension, or SEP retirement plan, makes that happen , at a significantly lower expense and with less reporting requirements. There are attractive benefits for both the employer and the employees. The plan is basically a group of individual retirement plans grouped together and maintained for the company . The employees can fund their account through a pre-tax salary reduction, deferring a portion of their salary to the plan . The SEP retirement plan allows for much higher contributions, so qualified participants can quickly build their retirement savings in a tax-sheltered environment. The benefits are fully vested immediately when they are contributed, making the SEP retirement account portable. Workers who change employers are allowed to roll their Sep balances into another IRA, or might decide to transfer them to another employer’s qualified retirement program. To be eligible for the SEP retirement account , the employee needs to be 21 years old, have worked for the company for three of the last five years and been compensated with at least $550 in wages. Most employers decide on a mutual fund company to administer the account . Each employee can then choose their individual investments from the offered funds, relieving the employer from having to make those decisions. Contributions are not required, so the employer can decide on the percentage and frequency of those contributions based on the business’s profitability. A start-up company might start the SEP retirement contributions at a relatively low percentage , increasing the contribution percentage yearly as the company becomes more viable. When economic or business conditions dictate, the contributions can even be put on hiatus. Portability, flexibility, and high contribution limits make the SEP retirement account a worthy contender for small business and self-employed considering a plan to secure theirretirement future.

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