SEP IRA

Posts Tagged ‘sep’

Question: Why would my employer pick a 401k over a SEP IRA?

Is it true that with a SEP IRA my employer would have to give all employees the same percentage he gives himself?

also…why would my employer agree to do the Safe Harbor matich? What’s in it for him?

Answer: Yes, that’s what a SEP is…he would have to provide most of his employers the same percentage in a Contribution as he would receive. A SEP really makes little or no sense these days….Don’t fault your employer for taking advantage of better plans that are available to him.

He does the safe harbor match rather than a straight 401k because he wants to avoid discrimination testing that would limit his Contribution amount if the employees didn’t participate. By choosing to provide a matching Contribution that is immediately 100% vested he gets to maximize his Contribution even if you (the employees) don’t choose to participate. That wouldn’t be the case with a regular 401k. He basically knows he can put in $20k into his retirement plan on an annual basis and the cost to him is 4% of the employees wages. A small business owner may have $500k in wages. 4% of that is $20,000. So, for putting in $20k to the employees (deductible by the way) he/she can put in 20k into her own account.

As you can see, that’s a much better scenario for the employer than the SEP. If your employer went that way then he/she would have been limited to 4% Contribution or $8k. Not smart…

But, keep in mind that with a Safe Harbor plan you benefit too….you get a match and it’s immediately 100% vested AND you get that match even in your last year of employment. If you have a normal match and you quit December 15…you forfeit the match for that year. Safe Harbor plans…you get that match.

celulares 4G

Question: What is the maximum amount a person can contribute to a SEP-IRA each year?

Answer: So as not to confuse you anymore; go to www.irs.gov and download publication 590. It is very easy to read and understand and has all of the info that you need.

The Maze Prison Break

Question: What is the best way to use my old 401K to fund my music career?

I’m 30, I have an old 401K from my past job. Should I create an LLC for myself, transfer to a SEP or SIMPLE IRA? What are the tax or penalties? Any new legislation for start-ups? Thanks!

Answer: you should be saving that money for retirement – withdrawing it now will cost you between 15-30% of it to taxes and penalty

just do a direct rollover to a regular IRA and leave it there

Elite Pensions LLC IRA part 1 of 4