The SEP individual retirement account is a kind of retirement vehicle allowed by the government that allows wage earning folks to save cash away for when they retire when they turn 59 and a half.
Why is this account so special? Because not everyone is allowed to invest in it. Not everyone has the ability or is allowed to establish this account. Why? As a normal working individual who works for a wage, in other words works for an employer, they are allowed to stash money away in a traditional IRA account, or a 401k account through work.
Those who are Self employed on the other hand are allowed to start a SEP IRA account, and they can use this account to save money for retirement. These funds grow free of tax and are there for withdrawal once the person reaches their retirement age.
Why is this account so good? When you are saving in a traditional 401k plan or a regular IRA, you are allowed to invest a fixed amount per year with no regard for how much you make annually, therefore there is no benefit added for people who earn more money, at least from an investment perspective.
In a SEP IRA, the more you make the more you can invest up to 20% of 250k of your total earnings. This is as a business owner. As an employee you are allowed 25% savings as the employer can set this up on your behalf.
Business owners penalized by a smaller amount to invest because they also have to oblige to self employment taxes. They pay this on their behalf, as well as on the employee's behalf. The employee only pays one half of this while employers pay two halves, more than 15%.
If you are working right now, maybe a side gig can benefit you so you can establish this kind of a retirement saving account. It allows you to save more over time. Saving more means more compounded growth. Have you considered it?
Why is this account so special? Because not everyone is allowed to invest in it. Not everyone has the ability or is allowed to establish this account. Why? As a normal working individual who works for a wage, in other words works for an employer, they are allowed to stash money away in a traditional IRA account, or a 401k account through work.
Those who are Self employed on the other hand are allowed to start a SEP IRA account, and they can use this account to save money for retirement. These funds grow free of tax and are there for withdrawal once the person reaches their retirement age.
Why is this account so good? When you are saving in a traditional 401k plan or a regular IRA, you are allowed to invest a fixed amount per year with no regard for how much you make annually, therefore there is no benefit added for people who earn more money, at least from an investment perspective.
In a SEP IRA, the more you make the more you can invest up to 20% of 250k of your total earnings. This is as a business owner. As an employee you are allowed 25% savings as the employer can set this up on your behalf.
Business owners penalized by a smaller amount to invest because they also have to oblige to self employment taxes. They pay this on their behalf, as well as on the employee's behalf. The employee only pays one half of this while employers pay two halves, more than 15%.
If you are working right now, maybe a side gig can benefit you so you can establish this kind of a retirement saving account. It allows you to save more over time. Saving more means more compounded growth. Have you considered it?
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