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Definition of the Week: SEP IRA

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SEP IRA

What is a SEP IRA? A Simplified Employee Pension Individual Retirement Account, or a SEP IRA, is an IRA setup by or for an employee to accept contribution’s from an employer. This type of IRA is often used by self-employed individuals, or small businesses who have a small number of employees.

stockbrokers.com Explains the SEP IRA

The SEP IRA is growing in popularity faster than any other retirement savings account. What explains the spike in popularity for this plan? The SEP IRA allows small business and self-employed individuals to get tax benefits from an IRA without having to pay high fees to establish or administer the plan. Contributions to the SEP IRA are tax-deductible and earnings grow tax-deferred. A primary benefit of the SEP IRA is the high contribution limits with the plan. Eligible employees can contribute the lesser of $49,000 per year or 25% of total employee compensation.

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