Get Control of the SEP IRA Maximum Contribution
The Simplified Employee Pension Plan, known as a SEP, wasintended to help self-employed workers and smaller companies that may not have the resources for a more conventional retirement plan. Among the most attractive features of the SEP is the simplicity of setting up and managing the account, and the very generous SEP IRA maximum contribution limit. In an employee plan, the employer determines the contribution level, frequently basing it on the company’s net profit and current economic conditions that impact the business . Contributions must be consistant for all qualified employees. The SEP IRA maximum contribution is $49,000 per year , or 25% of compensation, whichever is less . An employee will be eligible for the account if at least 21 years old, having worked for the company for three of the last five years and having been paid at least $550 for that work. SEP accounts are ideal for small companies , and for LLCs, partnerships, sole proprietorships, and S and C corporations. The SEP IRA maximum contribution for self-employed people is calculatedin a different way, since the self-employed do not receive wages. It is based on net profits from the business enterprise. The self-employed are allowed to contribute as much as 20% of net profits, up to $44,000. The calculation is net self-employed income minus one half of self-employment taxes to arrive at the net self-employment income, multiplied by 20% to determine the allowable contribution amount. Thisgreater SEP IRA maximum contribution allows the self-employed to save a lot of money , andeasily. If the self-employed also have a full-time job, there’s even greater opportunity to save the maximum amount annually and withcautious investment choices accumulate a significant amount to be enjoyed at retirement. SEP plans are simple straightforward to establish and require very minimum documentation . Administration is equally simple and low cost . With the favorable SEP IRA maximum contribution cap , it’s worth checking out the opportunities.