What’s the Advantage for the SEP IRA Employee?
If you are a SEP IRA employee, you have afantastic opportunity to accumulate retirement savings through your employer’s SEP plan. The SEP is a common-sense and sound program particularly made forsmaller firms and the self-employed worker , with the substantial advantage oflarger contribution limits. In the small company model, the employerdecides the contribution percentage, which must be identical for all eligible employees. The employer has theoption of changing the contribution amount and the frequency, and sometimes bases this conclusion on the company’s net profit outlook or existing economic circumstances. Employers are also permitted to put the contributions on hiatus .Annual contributions can be as much as 25% of compensation, or $49,000, whichever is less . The SEP is funded through a pre-tax salary reduction, so there areinstantrewards for the SEP IRA employee. To beeligible for the plan , the SEP IRA employee must be at least 21 years old, have worked for the company employer for three of the past five years and been compensated with at least $550. Essentially, the SEP plan is a group of traditional individual retirement accounts maintained for the employees. Thesubstantially larger contribution limit provides an opportunity for the SEP IRA employee to accumulate more funds for retirement, and at a quicker pace. SEP benefits are fully vested as soon as they are contributed, making the SEP completely portable. Employees who change companies can roll over theirfunds into another IRA or transfer the balance to a retirement plan sponsored by the new employer. Sometimes the business will decide on a mutual fund firm to administer the SEP plan . This provides the employees with the ability to make their own investment decisions based on their requirements,goals, and level of risk-tolerance. SEP accounts have the potential to provide solid retirement advantages for the SEP IRA employee who participates in the plan.
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Filed under category by on Aug 4th, 2011. 