Retirement Plan Investment Consulting
SEP IRA
SEP IRA
1. Overview
- Designed for self-employed individuals and small business owners.
- Employer contributions only (including to the owner’s own account), with the same contribution percentage for all eligible employees.
2. Tax Benefits
- At Contribution: Pre-tax contributions; fully deductible as a business expense.
- At Withdrawal: Fully taxable in retirement.
3. Withdrawal Rules
- Withdrawals before age 59½ generally incur a 10% penalty plus income tax.
- RMDs must begin at age 73.
4. Best For
- Self-employed individuals, freelancers, and small business owners.
- Those wanting high annual contribution limits to accelerate retirement savings.
Side-by-Side Comparison
| Feature | Traditional IRA | Roth IRA | SEP IRA |
|---|---|---|---|
| Tax at Contribution | Pre-tax, tax-deductible (may be limited) | After-tax, no deduction | Pre-tax, fully deductible |
| Tax at Withdrawal | Fully taxable | Tax-free (if qualified) | Fully taxable |
| RMDs | Yes (start at age 73) | None | Yes (start at age 73) |
| Income Limits | None (deduction may be limited) | Yes (high-income earners ineligible) | None |
| Contribution Limits (2025) | $7,000 ($8,000 if 50+) | $7,000 ($8,000 if 50+) | Up to 25% of compensation or $69,000, whichever is less |
| Best For | High current tax rate, expect lower in retirement | Low current tax rate, expect higher in retirement | Self-employed, small business, need higher limits |
Fair Investment Opportunity for Every Partners in Namerica
