Are you a small business owner, sole proprietor or have a successful side gig?

Should you consider a SEP IRA? Here is an introduction (or a reminder) of this popular and easy to use savings vehicle.

Be sure to coordinate with your trusted professionals, know the pros and cons for your particular situation and make a plan to save!

Please email with suggestions of topics we can cover in a future video, crose@clarusfinancial.com

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Link to IRS SEP IRA FAQs:
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As a small business owner, sole proprietor, or side gig earner, planning for your retirement is crucial. One retirement savings option that you should consider is a Simplified Employee Pension Individual retirement account (SEP IRA). A SEP IRA is a type of retirement plan specifically designed for small businesses and self-employed individuals.

So why should you consider a SEP IRA as a small business owner, sole proprietor, or side gig earner? Here are a few reasons to consider this retirement savings option:

1. High Contribution Limits: One of the biggest advantages of a SEP IRA is the high contribution limits. As of 2021, you can contribute up to 25% of your net earnings from self-employment, up to a maximum of $58,000. This allows you to save a substantial amount for retirement, which can be especially beneficial if you have a high income from your small business or side gig.

2. Flexible Contribution: Another benefit of a SEP IRA is the flexibility it offers. You can choose how much to contribute each year based on your business’s performance. In years when your business is doing well, you can allocate a higher percentage of your income to your retirement savings, and in leaner years, you have the option to contribute less.

3. Easy to Set Up and Maintain: Setting up a SEP IRA is relatively simple, and there are minimal administrative requirements compared to other types of retirement plans. This makes it an attractive option for small businesses and sole proprietors who want to offer a retirement savings plan to their employees without the hassle of a 401(k) plan.

4. Employer Contribution: As a small business owner, you have the option to make contributions to your employees’ SEP IRAs. This can help you attract and retain talent, as well as provide a valuable benefit to your staff.

5. Tax Benefits: Contributions to a SEP IRA are tax-deductible, which can help lower your taxable income. Additionally, your investments within the SEP IRA grow tax-deferred, meaning you won’t pay taxes on the earnings until you start making withdrawals in retirement.

While a SEP IRA offers many advantages, there are some things to consider before setting one up. For example, if you have employees, you will be required to make contributions on their behalf as well, which may not be feasible for all small businesses. Additionally, if you’re looking for a plan that allows for loans or hardship withdrawals, a SEP IRA may not be the best option for you.

In conclusion, a SEP IRA can be a valuable retirement savings option for small business owners, sole proprietors, and side gig earners. With its high contribution limits, flexibility, and tax benefits, it’s worth considering as part of your overall financial plan. However, it’s essential to weigh the pros and cons and consult with a financial advisor to determine if a SEP IRA is the right choice for your specific situation.