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Are you self-employed and looking for ways to save for retirement? The Simplified Employee Pension (SEP) IRA might be the solution you’re looking for. SEP IRAs are designed to provide small business owners and the self-employed with an easy, tax-advantaged way to save for retirement. This article will discuss what a SEP IRA is, how it works, and why it could be a great choice for self-employed entrepreneurs.
What Is A SEP IRA?
A SEP IRA is a type of individual retirement account (IRA) that allows employers to contribute towards their employees’ retirement savings. Employers can deduct these contributions from their taxes, making them an attractive option for both employers and employees alike. Self-employed individuals can also take advantage of these accounts by setting up one in their own name.
How Does A SEP IRA Work?
A SEP IRA works in much the same way as other IRAs. Contributions are made pre-tax, meaning that they are not included in your taxable income or subject to immediate taxation. These contributions grow tax-free until withdrawals are made at retirement age when they become taxable income at your then applicable tax rate. The maximum contribution that can be made each year is 25% of your net earnings from self-employment or $56,000 (whichever is less), meaning that you can contribute significantly more money than with other types of individual retirement plans. 
Advantages Of A SEP IRA For Self Employed People
One of the major advantages of a SEP IRA is its flexibility when compared to other types of plans like 401(k)s or traditional IRAs which require employer sponsorship and have very limited contribution limits ($19,500 in 2021). With a SEP IRA, contributions are discretionary - meaning you don’t have to contribute every year if you don’t want to - which makes it easier for those who experience fluctuating incomes from year to year or who need more control over their finances in the short term. Additionally, there are no required minimum distributions (RMDs) until you turn 72 years old – allowing your money more time to grow without being taxed – and no required start date when opening one either!
Conclusion
A SEP IRA could be the perfect choice for small business owners and self employed people looking for an easy way to save for retirement without having to worry about employer sponsorship or contribution limits like those found with other types of plans like 401(k)s or traditional IRAs . With its ability to accept large contributions each year as well as its lack of required minimum distributions until age 72 , this type of plan offers plenty of flexibility and can provide substantial benefits down the road!
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