In this video I want to share sep ira explained for Self Employed 2019.
The SEP IRA is like the third child in the family and tends to get overlooked. Self employed investors should really consider the sep ira. There are huge advantages to retirement investing with a SEP IRA and in today’s video I will cover a few of them.

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SEP IRA Explained for Self Employed 2019

If you are self-employed and looking for a reliable retirement savings plan, a Simplified Employee Pension IRA or SEP IRA could be the answer you are looking for. SEP IRA is a tax-advantaged retirement plan that allows self-employed individuals, freelancers, and small business owners to make tax-deductible contributions to their retirement savings account.

What is a SEP IRA?

A SEP IRA is a retirement plan designed primarily for self-employed individuals and small business owners. Unlike a traditional 401(k) or Roth IRA, which is an individual retirement account, a SEP IRA is treated as an employer-sponsored plan. This means that as a self-employed individual, you are both the employer and the employee, allowing you to take advantage of both employer and employee contribution limits.

Who is eligible to contribute to a SEP IRA?

Self-employed individuals and small business owners are eligible to contribute to a SEP IRA. This includes sole proprietors, freelancers, and independent contractors who earn income through their own business. Even if you have an employer-sponsored retirement plan, such as a 401(k), you can still contribute to a SEP IRA as long as you meet the eligibility requirements.

How much can you contribute to a SEP IRA?

As of 2019, the maximum contribution limit for a SEP IRA is the lesser of 25% of your net self-employment income or $56,000. For example, if your net income from self-employment is $100,000, you can contribute up to $25,000 to your SEP IRA. Keep in mind that the contribution limit is subject to change each year, so it’s essential to check the IRS website for updates.

One of the advantages of a SEP IRA is that contributions are tax-deductible. This means that you can lower your taxable income by contributing to your SEP IRA. It’s important to note that contributions to your SEP IRA are not subject to federal income tax until you withdraw them in retirement.

What are the benefits of a SEP IRA?

There are several benefits to consider when choosing a SEP IRA as your retirement plan:

1. Simple to set up and maintain
A SEP IRA is easy to set up and administer, making it an attractive choice for freelancers, independent contractors, and small business owners who do not have access to an employer-sponsored retirement plan.

2. Tax-deductible contributions
Contributions to a SEP IRA are tax-deductible, reducing your taxable income and allowing you to save for retirement while lowering your tax bill.

3. High contribution limits
The maximum contribution limit for a SEP IRA is significantly higher than that of traditional IRAs or Roth IRAs, allowing you to save more aggressively for retirement.

4. Flexible contributions
SEP IRA allows you to contribute as little or as much as you want each year, up to the annual contribution limit. This gives you the flexibility to save for retirement at your own pace and according to your financial situation.

Conclusion:

If you are self-employed, a SEP IRA can be an excellent retirement savings option. With high contribution limits, tax-deductible contributions, and flexible contribution options, you can save for retirement on your terms. As always, it’s essential to consult with a financial advisor to determine the best retirement plan for your unique situation.