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 2015, you can contribute up to $53,000 ($52,000 in 2014), 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.


Share Article:

Your Financial Checklist
Search Financial Library

*Non-deposit investment products and services are offered through Sorrento Pacific Financial, LLC ("SPF"), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through SPF: are not FDIC or otherwise federally insured, are not a deposit or guarantee of the bank, and may involve investment risk including possible loss of principal. Investment Representatives are registered through SPF. The bank has contracted with SPF to make non-deposit investment products and services available to bank clients.