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SEP IRA Accounts – The Pros and Cons

By Guest Author On June 13, 2011 Under Success Secrets

The SEP IRA accounts is a good choice for sole proprietorships, LLC’s, partnerships and S and C corporations. Normally there are no complicated forms or reporting to the government . The employer is not obligated to make contributions, and may decide on the percentage and frequency on an annual basis, perhaps deciding the contribution levels based on profitability of the company . Contributions can be put on hold if necessary, providing  a benefit if economic conditions impact the company. All contributions to SEP IRA accounts are tax-deductible and the business does not pay taxes on the profits on the investments. Often employers decide on a mutual fund firm to be the administrator for the plan . The individual employees will then select their own investments from the offered choices . The SEP IRA accounts can be transferred into a different employer’s qualified retirement account should there be a job change, and the portability feature also allows the SEP IRA accounts to be rolled over into a different IRA. Under the plan, an employee is identified as someone who works for the company , the employer-owner, or a self-employed person who has earned income. An eligible employee must be at least 21 years old , have worked for the business for three of the last five years, and received compensation of at least $550. . There is a requirement in the plan to provide uniform benefit to all eligible employees. Like several other types of individual retirement accounts, withdrawals from SEP IRA accounts are able to start as soon as age 59 ½, but earlier disbursements will incur a 10% IRS penalty tax as well as regular income tax. When the account owner reaches age 70 ½ mandatory distributions are required to begin . SEP IRA accounts provide many advantages, including the fact that the money is fully vested on contribution.  Small companies and the self-employed appreciate the many features of SEP IRA accounts which are flexible, portable, and a smart way to save and prepare for retirement.

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