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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Tuesday, June 20, 2006

Retirement Planning: SEP IRAs

SEP (simplified employee pension) IRAs is a form of IRA that acts as a low-cost pension plan for small businesses.

Important Information:
  • All contributions made under a SEP are employer contributions--not employee
  • Not required to make contributions each year
  • SEP-IRAs of all participants must get contributions (you cannot pick and choose)
  • Employers can deduct the contributions on their tax return
  • Sole proprietors, Partnerships, Corporations can all participate
  • Employee owns 100% of contributions to SEP
  • Contributions the employee’s SEP-IRA cannot exceed the lesser of:
    • 25% of a participant’s compensation or
    • An annual dollar limit.


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