SEP IRA

Posts Tagged ‘sep’

Question: SEP IRA vs. Individual 401K?

My husband is self-employed. Currently he contributes to his SEP IRA but I read an article that said self-employed persons with no employees could contribute more to an Individual 401k. Our broker said, Ask the accountant and the accountant said Get the details from the broker. So, what’s the answer?

Answer: While both retirement accounts have a limit of $49,000 per year, you may be able to contribute more to an Individual 401k, at the same income level. The reason: you can contribute up to 100% of the first $16,500 of net self-employment income to the 401k, plus a profit sharing Contribution of up to 20% for self-employed (SE) individuals.

The SEP-IRA has a Contribution limit of 20% of net self-employment (SE) income, after deducting 1/2 of your SE tax. So, if your husband has net income of $100,000, he could contribute $18,587 to his SEP-IRA, and substantially more, near double that, to his 401k.

The SEP, however, is easier to set up and administer. The 401k allows for loans from the plan (a disadvantage, in my opinion).

Hope that helps.

DISCLAIMER: While the information in this response was obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. The opinion voiced in this answer is for general information only and is not intended to provide specific advice or recommendations for any individual. Questioners are urged to consult with their professional advisers before making any decisions regarding their finances.

Financial Services Chino CA: Investments, Mutual Funds, 401k, IRA, Annuity, Life Insurance

Jacob Gold talks about Roth IRA Eligibility

Question: What is the penelty for cashing out a SEP IRA, roth ira and an individual ira prior to retirement?

Being laid off a last resort might be to cash is retirement to pay off mortgage. What are the downfalls?Thanks

Answer: ROTH – after 5 years of that money being in the account, you can take the money out without the 10% penalty.
Read all the rules – there may be something there about not paying the 10% penalty if you are unemployed – so many rules – makes your head spin.
IRA – you will pay 10% penalty plus current tax rate – which if you are unemployed may be LOW.
SEP – have no clue.
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