SEP IRA & Simple IRA
Personal FinanceSponsored Content

Curriculum Content
The US government sponsors its own retirement programs, known as an individual retirement account or IRA. These accounts are self-directed and self-defined. Most are enrolled in on a personal basis, but some can be used specifically by business owners. The self-employed can use SEP IRAs and business owners with employees can use SIMPLE IRA to provide for their employees.
SEP IRA
The Simplified Employee Pension Individual Retirement Account (SEP IRA) is a variation for business owners. This includes both employers and sole proprietors. SEP IRAs can be acquired at banks or brokerages. These IRA plans cover both the business owner as well as the employees.
Contributions are limited and plans have restrictions for owners with employees that do not apply to sole proprietors. If a firm has employees, any contributions to a SEP IRA must be the same percentage of salary contributed to the SEP IRA of all employees. In 2013 employers can contribute either 25% of worker’s compensation, or $51,000, whichever is less. Employers are not required to make payments. Employees can contribute a maximum of $5,500 to their combination of IRA accounts, including SEP IRAs. The cost of a SEP IRA can multiply dramatically for a business with a large number of employees.
Your SEP IRA withdrawals can begin at any age after 59½. Before this age, you will pay income tax on withdrawals with an additional 10% penalty for non-qualified distributions. At age 70½ you are required to begin distributions from your SEP IRA account. These distributions will be taxed at your regular income rate.
SIMPLE IRA
Another alternative is the SIMPLE IRA program. Like SEP IRAs, this program is established by small business owners, with some minor differences. The SIMPLE IRA program can be established by businesses with fewer than 100 employees. These employees must earn higher than $5,000 annually per year. Employees can optionally contribute up to $12,000 in 2013 and up to $14,500 if over the age of 50. These numbers are boosted by employer contributions, which can be made on your behalf by your employer.
Employers can match contributions in one of two ways. The first option is to match every employee’s contribution to their SIMPLE IRA. They can contribute a maximum of 3% of total compensation or $12,000 in 2013, whichever is less. The second option is to contribute to every eligible employee’s salary once each year. This contribution is 2% of their total compensation or $5,100 in 2013, whichever is less. Employees are not required to contribute to receive the second option. An “eligible employee” is defined by two characteristics. The employer has paid the employee income in two prior years and will pay the employee over $5,000 in total compensation in the current year. There is no age restriction for SIMPLE IRA accounts.
Your Simple IRA withdrawals can begin at any age after 59½. Before this age, you will pay the income tax on withdrawals and an additional 10% penalty for a non-qualified distribution. Distributions before age 59½ can avoid the 10% penalty if the owner is permanently disabled, paying for qualified education expenses, buying a first time home, or paying for under 10% of unreimbursed medical expenses. At age 70½ you are required to begin distributions from your IRA account. Any distributions after 59½ will be taxed at your regular income rate with no tax penalty.
Beneficiaries
You may die before your SEP or SIMPLE IRA is empty. In this case, the account’s assets will be inherited by your beneficiary. Note that your beneficiary is not designated by your will. You must entitle your beneficiary in the account’s forms. If you want to change who inherits your account’s fund, you must update the beneficiary. No other document will impact who receives your account’s funds in the case of your death. If your beneficiary is younger than 18 you will need to assign them a custodian until they’re an adult.
Did we help you? Vote with a Crypto-Donation!
Visit on Steemit!
Support us on Steemit!

Donate Bitcoin
141FSmuHkMSZVsQQtE9GHSPyj6gAonqqWR

Donate Dash
Xr4fdtP78Mh3gnVwAUjjuZRCq3kubaHZ5o

Donate Litecoin
LcrxGsshB2j9SddnZNdLfYMsDqAtw3Dr9v

Donate Iota
LXIVNBVHRYBOHRWNGMBNHOYMT9GBEFTPQMKDUZUYYHGMPXOOEYETMUQZXWXCGWBMTFERLW9LMCKNUDCKAMDOQCNDNZ
Visit on D.Tube!
Support us on D.Tube!

Donate Bitcoin Cash
14NCVeGCZfHf7tiy9N2Yz1mrBNi9m2mQ4S

Donate Ethereum
0xAF7d66B09F34833Ccec1Ed9e4D356D40c09698e5

Donate Ripple
raiZ2rCXLeBTUh2A4voKALZpMxQ88KxZxm

Donate Monero
42byh9AjzB3XXRptSeSfzAGC588HRZgVXAGMay6yYKjjAHinUxdQkxw3Ay1XcziXV86XY57aRqG5kGnJ8LFWmSjmAnUEnYh
International Economic Analysis:
- Major Currency Economic Summaries
- Performance of Major Imports and Exports
- Mandates of Central Banks versus Expectations
- Performance Indexes of Major Economies
- Economically Correlated Currency Projections
- Large Funds Currency Sentiment Readings
- List of Technical Indicators to Look For
- Occasional: Foregin Exchange Technicals Markups
American Markets Analysis:
- Summaries of American Economic Structure
- Performance of Major
- Imports/Exports
- Federal Reserve Mandate versus Expectations
- Performance Indexes of U.S Economy
- Economically Correlated U.S Dollar Projections
- Large Trading Fund Index Sentiment Readings
- Market Wide Earnings Versus Valuations
- Fundamental Ranking of U.S Business Sectors
- Best and Worst Future Consensus Estimates
- Occasional: Firm Fundamental Strength Report
- List of Technicals to Look for While Trading